Welfare success meets global supply crunch

India’s LPG demand has surged due to welfare initiatives. While a safety net is necessary, simply subsidising LPG will only keep consumption high

- V SHUNMUGAM

THIS MONTH, A surge in panic buying and long queues at LPG distributors surprised Indian households. The root cause is supply disruptions from the West Asia conflict, combined with India’s remarkable clean-cooking success.

Over the past decade, policies like the Pradhan Mantri Ujjwala Yojana (PMUY) have connected about 330 million households to LPG. However, our refineries produce less than half of the required LPG, making India heavily reliant on imports. This dependency exposes every gas stove in the country to global supply shocks.

India’s LPG demand has surged due to welfare initiatives. Since its launch in 2016, the PMUY aimed to replace smoky chulhas with cleaner LPG stoves for women in low-income households. By early 2025, there were roughly 32.9 crore active domestic LPG connections, with over 10.3 crore beneficiaries. A decade ago, India used roughly 15 million metric tonnes (MMT) of LPG; now it is 31-32 MMT. Overall, policy has greatly expanded LPG usage, benefitting public health and women’s empowerment, but the demand has exceeded domestic supply capacity.

This surge in demand conflicts with strict supply limitations. Indian refineries are unable to produce enough LPG. Even at maximum capacity, domestic production covers only 40-45% of the demand. Why is the domestic share so low? Because LPG (propane and butane) is a byproduct of crude oil and gas processing. Refineries prioritise oil products and petrochemicals, leaving little room to increase LPG output beyond their original design. The government has invoked the Essential Commodities Act to compel refineries to divert all available propane and butane to LPG production. This move raised output by roughly 25%, according to officials, but it still couldn’t fill the supply gap.