Economy
In charts: The dynamics behind the LPG price hike
Summary
Domestic LPG production has not kept pace with increasing LPG adoption and consumption, making India reliant on imports.
Earlier this month, the government increased the price of liquefied petroleum gas (LPG) by ₹50 per 14.2 kg cylinder. The hike, which comes roughly after a year, will see the price of an LPG cylinder across metros now range from ₹853 in Delhi to ₹879 in Kolkata. Underpinning this hike is evolving demand-supply dynamics.
The expansion in its coverage and usage as a cooking fuel has made LPG politically sensitive to a greater degree than before, even as domestic infrastructure to support such consumption has not kept pace.
Data from both the government and oil companies shows a sharp increase in active LPG connections. Even as of 2019-20, according to the last National Family Health Survey (NFHS) by the government, 88.6% of urban households used LPG or natural gas as a cooking fuel.
However, production has not kept pace, forcing oil companies to import LPG to a greater degree. Imports as a share of domestic consumption have risen almost 20 percentage points over the last 10 years. As a result, the domestic LPG economy has become highly sensitive to global prices.
The domestic price of LPG paid by consumers (in Delhi) has closely tracked the effective price at which LPG has been imported over the years. The only exception to this trend was during the run-up to the general elections in mid-2024 and after. While there was a spike in the import price, it was not matched by an increase in domestic prices paid by retail consumers. This hike changes that.
Domestic expansion
The number of LPG connections in India has increased from 149 million in 2015 to around 329 million in 2025. Assuming that a single LPG connection provides cooking fuel to a four-member household, this implies that LPG is now the dominant source of cooking fuel for Indians by a wide margin. Oil companies' own estimates are that 99% of the Indian population is now covered by LPG, thus implying universal coverage.
The expansion in connections has come about due to increasing affluence, as well as government schemes to promote the use of LPG such as the Pradhan Mantri Ujjwala Yojana (PMUY).
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Of the total 329 million connections, PMUY beneficiaries, who access cylinders at about ₹300 less than the standard price, account for about 103.3 million. PMUY beneficiaries as a share of total LPG consumers have risen from 27% in 2019 to about 31% as of 2025.
Stagnant production
In spite of rising consumption, domestic LPG production has stagnated, at 12-13 million tonnes since 2017-18. In 2024-25, for the 11-month period to February 2025, LPG consumption was 28.6 million tonnes, against production of 11.7 million tons. Even the number of LPG distributors has plateaued. Between 2015 and 2020, their numbers rose from 15,930 to 24,670. In the five years since, the increase is below 1,000.
The gap between production and consumption is unlikely to be bridged. According to an analysis by the Observer Research Foundation by Lydia Powell and co-authors: “Indian refineries are more optimally designed to produce petrol and diesel, and have lower LPG yields, which in turn limits domestic LPG production…with abundant LPG availability in international markets, thanks to increased production from the US, Indian oil companies are unlikely to dramatically increase LPG production in the future."
India’s traditional fuel suppliers—Qatar, Saudi Arabia and UAE—are also its largest LPG suppliers, it adds.
Government subsidies
For 2025-26, the government has budgeted ₹11,100 crore towards LPG subsidies. This mainly comprises direct benefit transfer to households for the LPG subsidy, and a scheme to provide new LPG connections to poor households. Interestingly, just 10% of the total beneficiaries under the PMUY scheme are from Southern states. This is mainly because many households in Andhra Pradesh, Tamil Nadu and Telangana were already covered by state schemes.
In addition, there are periodic transfers by the central government to oil marketing companies for selling LPG to consumers below a benchmark price. In 2022-23, the governments transferred ₹22,000 crore to oil companies for such ‘under-recoveries’. The major challenge for the government is now on the production side, in getting oil companies to invest in infrastructure to supply LPG to a greater extent to the increased, and growing, mass of consumers.
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