Context: For the first time, India has signed a structured, year-long agreement to import 2.2 million tonnes (MMT) of Liquefied Petroleum Gas (LPG) from the United States, starting in 2026. Indian public sector refiners, including IOC, BPCL, and HPCL, finalised the contract, marking a major diversification in India’s energy supply chain.
Significance of the Deal
1. First Formal LPG Agreement
This is the first structured contract between India and the US for LPG supply, forming nearly 10% of India’s annual LPG imports.
2. Shift in Price Benchmarking
- The pricing will use the Mont Belvieu benchmark instead of the traditional Saudi Aramco Contract Price (CP).
- Mont Belvieu (Texas) is the world’s largest LPG storage and pricing hub, where daily spot prices reflect North American market dynamics.
- This shift reduces India’s dependence on Middle Eastern pricing mechanisms and allows greater price transparency.
3. Strategic Value
- Enhances energy security by diversifying supply sources beyond West Asia.
- Strengthens the India–US strategic partnership, complementing cooperation on critical minerals, LNG, technology, and defence.
- Provides a hedge against geopolitical disruptions in the Gulf region.
India’s LPG Landscape
1. Global Ranking
India is the second-largest LPG consumer worldwide (32 MMT annual demand), after China.
2. Sectoral Consumption
- Domestic kitchens: ~90% of demand
- Commercial & Industrial: Hotels, eateries, industries
- Automotive: Auto-LPG vehicles
3. Import Dependence
India imports 60%+ of its LPG needs, mainly from:
- UAE
- Saudi Arabia
- Qatar
- Kuwait
The US deal reduces over-reliance on West Asia.
4. PMUY – Social Impact
The Pradhan Mantri Ujjwala Yojana (PMUY) provides deposit-free LPG connections to low-income women and targeted subsidies for up to 9 refills annually, making LPG a central pillar of India’s clean energy transition.
About Liquefied Petroleum Gas (LPG)
- Composition: Primarily propane (C₃H₈) and butane (C₄H₁₀).
- State of Matter:
- Gas at normal temperature & pressure.
- Converts to liquid under moderate pressure or cooling → enabling efficient storage & transport.
- Volume Ratio: Liquid LPG occupies 1/250th of its gaseous volume.
- Safety: Naturally odourless; ethyl mercaptan is added for leak detection.
- Risk: LPG vapour is heavier than air and collects at low points, increasing explosion risk.
- Global Producers:
- Largest Producer: United States
- Other major producers: Saudi Arabia, China
- Top Exporters: United States & Qatar
Conclusion
India’s first-ever LPG deal with the US marks a major milestone in its energy diplomacy. By shifting to the Mont Belvieu benchmark and reducing dependence on West Asian suppliers, India strengthens its energy security, supply resilience, and geopolitical leverage, while deepening its strategic partnership with the United States.