The Indian government has asked oil refiners to prioritise the use of propane and butane streams for LPG production to ensure adequate domestic cooking gas supply, instead of using them as petrochemical feedstock, an official document seen by Argus shows.
State-run IOC, BPCL, and HPCL have been asked not to divert, utilize, process, crack, convert or otherwise employ propane and butane streams for manufacturing of petrochemical products or other downstream products, the document shows.
India's LPG output meets close to 40pc of its consumption of around 33mn t in 2025, oil ministry data show. Propane and butane are key feedstocks for propylene and ethylene production in the country.
As part of India's Essential Commodities Act, New Delhi has also directed oil marketing companies to supply or market all procured LPG solely to domestic LPG consumers.
The development has come in the backdrop of a supply shortage of the cooking fuel after several LPG time charters carrying the fuel have failed to transit the strait of Hormuz over the last five days.
India is close to exhausting its 10-day buffer of LPG stocks to cover demand as the US-Iran conflict has effectively dried up exports from the region, traders said.
Limited terminal capacity in India has put a cap on the country's stockpiling while its reliance on LPG imports to meet booming consumption has increased in recent years, market participants said.
Supply curtailments from the Mideast makes India's overly exposed to LPG supply risk as the region accounted for 90pc, or 21.53mn t, of India's LPG imports in 2025 despite an increase in US supplies. Around 95pc of these Middle Eastern supplies transit the strait of Hormuz, according to ship tracking firm Kpler.
Indian LPG importers were seeking prompt LPG deliveries. A tender issued by Indian importer HPCL on 25 February for up to 20,000t of flexible ratio LPG to be delivered every month over March to December on a cfr basis was expected to provide the first public indication of delivered premiums against the CP. The tender closed on 3 March and was reported to have gone unawarded.
The government directive is also likely to weigh on petrochemical output, as LNG supply to the sector remains under pressure after state-run Petronet passed a force majeure note to its offtakers.
Only one out of Petronet's three captive LNG tankers plying between India and the Middle East, has managed to unload LNG at the 17.5mn t/yr Dahej terminal.
India, which still imports a large share of its polymer needs from the Middle East, is staring at supply tightness following a near halt in shipments from the Gulf Cooperation Council nations.
ONGC Petro Additions (Opal) — the petrochemical arm of state-owned upstream firm ONGC — said on Thursday that supply disruptions caused by the ongoing Iran war have impacted production at its Dahej plant on the west coast of India. Indian producers such as Indian Oil Corporation, HPCL-Mittal Energy Limited (HMEL), and GAIL's plants are also likely to get affected, a market participant said.
