West Asia Conflict: The ongoing West Asia conflict has triggered significant risks to the Indian economy. The war, involving the United States, Israel and Iran, has sent ripples across India following disruptions of energy imports through the Strait of Hormuz, a narrow waterway between Iran and Oman that connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.
To deal with such unforeseen situations in the future, the government is planning to set up strategic gas reserves. It will likely gather momentum after the West Asia crisis.
Sources told ET Now that the oil ministry has already prepared a draft proposal to set up strategic gas reserves.
Key takeaways
– The government is likely to speed up the process of setting up gas reserves, in line with strategic crude reserves.
– The oil ministry has completed consultations with stakeholders on the proposal.
– Initial proposal suggests setting up a dedicated entity on the lines of Indian Strategic Petroleum Reserves Limited.
– Proposal also suggests companies such as ONGC, GAIL and EIL to set up the entity.
– Additional storage at existing terminals was also part of the proposal.
– However, not much work has been done on the proposal so far.
– The government is likely to expedite the process to deal with unforeseen situations in the future.
– Strategic reserves could help the government ensure price and supply stability.
Iran allows India-flagged tankers to pass through Strait of Hormuz
Meanwhile, Iran has reportedly allowed India-flagged tankers to pass through the Strait of Hormuz after talks between the two countries, with Indian vessels Pushpak and Parimal transiting safely.
Clearance is followed by a high-level discussions between India and Iran on maritime movement. According to a report by Times Now, the relief came after talks between EAM S. Jaishankar and Abbas Araghchi.
Indian tankers Pushhpak and Parimal, have safely transit the Strait of Hormuz.
70% of India’s crude imports now routed outside Strait of Hormuz
Joint Secretary for the Ministry of Petroleum and Natural Gas Sujata Sharma has said that India’s crude supply is secure and about 70 per cent of the country’s crude import is now coming from outside the Strait of Hormuz.
Addressing an Inter-Ministerial briefing on recent developments in West Asia in New Delhi, she said that the volume of crude oil secured by the government exceeds what normally would have arrived through the Strait of Hormuz. She added that the country today imports crude oil from 40 countries and oil marketing companies have secured various crude cargos through different sources.
Key takeaways: Crude Oil, Natural Gas and LPG
Crude Oil
– India’s crude oil supply remains secure. India’s daily consumption is about 55 lakh barrels and through diversified procurement the volumes secured currently exceed what would normally have arrived through the Strait of Hormuz during this period.
– India now imports crude from around 40 countries. As a result of this diversification, about 70 per cent of crude imports are now coming from routes outside the Strait of Hormuz compared with about 55 per cent earlier.
–Two additional crude cargoes are already on the way and will arrive in the coming days, further strengthening the crude oil supply position.
–Refineries across the country are operating at very high capacity utilisation levels, in some cases even above 100 percent capacity utilisation.
Natural Gas
–India’s total natural gas consumption is about 189 MMSCMD, of which 97.5 MMSCMD is produced domestically. About 47.4 MMSCMD of supply has been affected due to force majeure conditions.
–Procurement through alternative suppliers and routes is underway to offset this disruption. Gas companies have also secured LNG cargoes from new sources and two LNG cargoes are on their way to the country.
–The Government issued a Natural Gas Control Order on 9 March 2026 under the Essential Commodities Act to manage gas supplies and protect priority sectors.
–Domestic PNG supply and CNG for vehicles will receive 100 per cent supply with no cuts.
–Tea industries, manufacturing units and other industrial consumers connected to the gas grid will receive about 80 percent of their previous six-month average supply.
–Fertiliser plants will receive about 70 per cent supply, while refineries and petrochemical units will take a reduction of about 35 per cent so that higher priority sectors can be protected.
LPG
–India imports about 60 per cent of its LPG consumption and out of these imports about 90 percent come through the Strait of Hormuz, which has been impacted due to current happenings.
–On March 8, 2026, the Government issued an order directing refineries and petrochemical complexes to maximise LPG production by diverting propane, butane, propylene and butenes streams to the LPG pool. As a result of these measures, domestic LPG production has increased by about 25 percent and the entire domestic LPG production is being directed towards household consumers.
–For non-domestic LPG, priority is being given to essential sectors such as hospitals and educational institutions.
–A three-member committee of Executive Directors from IOCL, HPCL and BPCL has been constituted to review allocations to restaurants, hotels and other commercial users and to ensure fair and transparent distribution of available LPG supplies.
–The current price of a domestic LPG cylinder in Delhi is Rs 913 after a recent Rs 60 increase. For PMUY beneficiaries the price remains Rs 613 per cylinder.
–For a PMUY household, the recent increase translates to less than 80 paise per day.
–Even though the Saudi Contract Price has increased by about 41 per cent since July 2023, the PMUY price has fallen by about 32 percent during the same period due to government support.
–The Government has approved Rs 30,000 crore compensation for oil marketing companies for LPG under-recoveries.
–Field feedback indicates some panic booking and hoarding behaviour. However, the normal delivery cycle for domestic LPG remains about 2.5 days and consumers have been advised not to rush-book cylinders.
–The Delivery Authentication Code (DAC) system is being expanded to about 90 per cent of consumers to prevent diversion at the distributor level.
–As a temporary demand-management measure, the minimum gap between LPG bookings has been increased from 21 days to 25 days.
–Oil marketing companies and enforcement teams are coordinating at the field level to clear distributor backlogs and ensure smooth deliveries.
–The Government is continuously monitoring the global situation and taking necessary steps to ensure uninterrupted fuel supplies and protect households and priority sectors.
