India has signed its first major structured liquefied petroleum gas (LPG) import deal with the United States, a move the government says will broaden energy security as the country leans on record levels of imported cooking fuel.

Petroleum Minister Hardeep Singh Puri on Monday announced that state-run oil companies — Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) — have finalized a one-year agreement to buy about 2.2 million tons per annum (MTPA) of LPG from the US Gulf Coast for the 2026 contract year. The cargoes will be priced against the Mont Belvieu benchmark, one of the world’s most widely used reference points.

The volume represents nearly 10% of India’s annual LPG imports, which hover around 20–21 MTPA, and marks the first time that India has entered into a structured long-term purchase from US producers. Payments will be settled in US dollars (USD), while domestic pricing for household cylinders will continue to be administered in Indian rupees (₹) under government subsidy policy.

“This is a historic development,” Puri said, arguing that one of the world’s largest and fastest-growing LPG markets had now formally opened to American suppliers. A delegation of PSU executives had travelled to the United States in July to negotiate with firms including Chevron, Phillips 66 and TotalEnergies Trading before the deal was sealed.

Diversification Push Amid Global Volatility

India imports over 65% of its LPG needs, historically relying on Middle Eastern suppliers. The UAE, Qatar, Kuwait and Saudi Arabia together account for nearly 98% of India’s shipments, according to industry trackers. In FY24, the UAE supplied roughly 8.1 MT (around 40%), Qatar 5 MT (25%), Kuwait 3.4 MT (17%) and Saudi Arabia 3.3 MT (16%).

Analysts say this dependence exposes India to price spikes and geopolitical risks, including shipping disruptions in the Gulf region. The US, now the world’s largest LPG exporter due to its shale boom, has long been viewed as a potential alternate supplier, though freight economics and pricing formulas had kept such deals on hold until now.

By tapping US-origin barrels, New Delhi hopes to hedge political risk and gain more predictable pricing. A senior executive at a state refiner said the move “breaks the Middle East monopoly” and gives public-sector buyers leverage in future term renewals.

Cushioning Consumers at Home

Puri underlined that the deal will help stabilize supply and support government efforts to shield households from last year’s global price shock, when international LPG prices jumped more than 60%. While the market price touched ₹1,100 per cylinder (about USD 13.2), beneficiaries under the Pradhan Mantri Ujjwala Yojana continued paying ₹500–550 (USD 6–6.6) after subsidies.

The government spent over ₹40,000 crore (USD 4.8 billion) last year to maintain these lower rates. Officials say predictable sourcing from the US could ease volatility in the domestic subsidy bill, though the impact will depend on freight spreads and Mont Belvieu movements in 2026.

India’s LPG Appetite Remains Strong

LPG has become the dominant cooking fuel for nearly 80% of Indian households, after a decade of rapid infrastructure build-out and aggressive enrolment under Ujjwala, which now covers more than 100 million beneficiaries. India consumed roughly 28–30 MTPA of LPG in FY24, and imports surged 24% last year due to election-linked demand, softer domestic output and increased petrochemical diversion.

Imports are expected to stabilize around 20–21 MTPA over the next two years, though analysts note that any slowdown in household demand could be offset by industrial and commercial growth.

A New Axis in India–US Energy Trade

The deal arrives at a politically delicate moment in India–US trade relations, following Washington’s recent imposition of 50% tariffs on select Indian exports and an additional 25% levy linked to New Delhi’s discounted Russian oil purchases. Energy trade — long dominated by crude, LNG and renewables — now gains a new, sizable LPG component.

While the contract runs for only a year, officials say the agreement sets the stage for larger volumes or longer tenures in future cycles, especially as India ramps up new LPG terminal capacity in Mundra, Haldia and Andhra Pradesh.

“This is part of a broader effort to secure affordable, reliable and cleaner cooking energy for millions,” Puri said, calling the deal a milestone in India’s diversification strategy.

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