Centre rolls out new LPG allocation formula to protect key industries

Amid escalating geopolitical tensions in the Middle East the Indian government has introduced a revised LPG allocation formula aimed at ensuring uninterrupted supply to critical industries The move announced by the Ministry of Petroleum and Natural Gas is intended to stabilise supply chains and protect sectors vital to the countryrsquos economic resilienceFocus on Critical Sectors to Maintain Supply ChainsUnder the new policy bulk LPG supplies will be prioritised for a wide range of industries including pharmaceuticals food processing agriculture polymers packaging paints steel ceramics glass and aerosols These sectors are considered essential due to their direct impact on everyday consumption healthcare and industrial productionOfficials noted that ensuring fuel availability for these industries is crucial to prevent disruptions in manufacturing and distribution particularly at a time when global uncertainties threaten energy suppliesAllocation Capped Supply Linked to Past ConsumptionAs per the revised formula industries will receive up to 70 per cent of their LPG consumption levels recorded before March 2026 This benchmarkbased allocation aims to maintain fairness while ensuring that essential operations continue without major interruptionsHowever the government has imposed an overall cap of 02 thousand metric tonnes per day for the entire industrial sector This ceiling reflects the need to balance limited resources amid fluctuating global supply conditionsPriority for Units Without Alternative Fuel OptionsA key feature of the policy is the prioritisation of industries that cannot switch to alternative fuels such as piped natural gas PNG Factories where LPG is indispensable to the manufacturing process will receive supply preference to avoid production haltsAt the same time industries capable of transitioning to PNG have been encouraged to do so Units are required to register with oil marketing companies and apply for PNG connections through city gas distribution networksHowever exemptions have been provided for industries where LPG remains a nonsubstitutable input ensuring that operational efficiency is not compromisedIncentives for States to Promote GasBased AlternativesThe Centre has already allocated 70 per cent of packaged nondomestic LPG to states and announced an additional 10 per cent allocation for those implementing reforms to promote PNG adoptionState governments have been advised to take proactive measures including disseminating the Natural Gas and Petroleum Products Distribution Order 2026 leveraging reformlinked allocation benefits and expediting policies related to compressed biogasSurge in Demand for Smaller LPG CylindersThe policy shift comes alongside a noticeable rise in demand for smaller LPG cylinders across the country Since late March approximately 78 lakh 5kg free trade LPG cylinders have been sold indicating increased reliance on LPG amid supply concernsDaily sales have also surged crossing 106 lakh units on a single day earlier this week compared to an average of around 77000 per day in February The trend highlights growing consumption pressures and the need for efficient allocation mechanismsStrategic Move Amid Global UncertaintyThe revised LPG allocation framework reflects the governmentrsquos effort to balance domestic industrial needs with evolving global energy dynamics As tensions in key oilproducing regions continue to influence supply chains such policy measures are expected to play a crucial role in maintaining economic stability and industrial continuity