First-Ever India-US LPG Import Deal

First-Ever India-US LPG Import Deal

Why in News?

Recently, India and the United States finalized their first-ever structured LPG import deal, marking a significant milestone in bilateral energy cooperation. It opens the doors of one of the world’s largest and fastest-growing LPG markets to American suppliers for the very first time.

• India and the United States entered a one-year structured contract in 2025 to support LPG supply for the contract year 2026. 
• India agreed to source about 2.2 million tonnes per annum (MTPA) of LPG from the US Gulf Coast under this framework.

Current Status of India’s LPG Sector

• India has expanded LPG access at an unprecedented pace in the last decade. The country increased household coverage sharply after the government launched the Pradhan Mantri Ujjwala Yojana (PMUY) in 2016. The scheme provided free LPG connections to low-income households and encouraged millions of families to shift from solid fuels. 
• India recorded 100% LPG household penetration according to official petroleum statistics. The number of active domestic consumers crossed 32.83 crore connections by 2024, making India the world’s largest LPG consumer market.
• India produces LPG through public and private refineries. India produced around 18 million tonnes of LPG in 2023–24 as per official petroleum ministry data. The country imported around 17 million tonnes in the same period, which shows that imports meet nearly half of national requirements.
• India relied on traditional suppliers from the Middle East for several decades. Countries such as Saudi Arabia, the United Arab Emirates, and Qatar supplied most of India’s LPG cargoes from 2010 to 2022. 
• Import patterns began to diversify after global market disruptions in 2022, when energy prices became volatile. India started exploring new supply routes from Africa, and Southeast Asia to reduce risks linked to dependence on one region.
• India has commissioned new import terminals, including a modern facility in Kochi by Indian Oil, which has a storage capacity of 15,400 metric tons (MT). 
• Terminals in Mundra and Haldia were also added to the network to manage increasing import needs and provide strategic distribution points on both the west and east coasts.
• The new and expanded terminals are designed to handle larger vessels (up to Q-Max size) and higher cargo volumes, improving operational efficiency and reducing congestion at ports, which had previously been a concern.

Significance for India’s Domestic LPG Market

• Reduce Import Concentration: India signed a one-year structured contract of LPG from the US Gulf Coast for 2026 will reduce India’s reliance on traditional Gulf suppliers and add a new major supply corridor. The agreement will give Indian refiners and importers an alternative source for nearly 10 percent of annual import volumes.
• Stable Domestic Supply: India secured term volumes to match fast growing household demand for clean cooking fuel. The contract supports predictable deliveries to bottling plants and reduces the chance of acute shortages. The structured supply will help maintain supply for millions of subsidised consumers who gained LPG access since 2016 under national programmes.
• Price Competition: The entry of US cargoes increases competitive pressure on global sellers. The deal can influence term contract pricing and spot market behaviour. Competition from US exporters may help India negotiate better commercial terms for future contracts. The contract provides supply predictability that lowers operational risk for Indian oil marketing companies.
• Geopolitical Rebalance: The agreement strengthens India-US energy ties and signals closer strategic cooperation. The pact diversifies India’s energy partners and reduces overdependence on any single region during geopolitical stress. The decision also aligns with broader diplomatic engagement between the two countries in 2025.

India–US Energy Cooperation

• India and the United States strengthened their energy partnership steadily over the last two decades. Both countries increased high-level dialogues after 2005. The relationship expanded into hydrocarbons, clean fuels, and strategic reserves after 2017.
• American exporters gained a larger share of India’s hydrocarbon market because output in the United States rose consistently after 2010. India prioritised diversification after facing volatility in global markets in 2022. 
• Both nations cooperated in areas that strengthened their ability to handle supply disruptions. India built its Strategic Petroleum Reserve (SPR) between 2015 and 2020, and the United States emerged as a key technical and commercial partner. 
• The United States offered access to research programmes, industrial partnerships, and early-stage technologies. Both countries supported innovation through joint working groups that reviewed policy frameworks and technology requirements.
• Strategic Clean Energy Partnership (SCEP)  was launched under the U.S.-India Climate and Clean Energy Agenda 2030 Partnership. The SCEP organizes cooperation across five pillars: Power and Energy Efficiency, Responsible Oil and Gas, Renewable Energy, Sustainable Growth, and Emerging Fuels.
• Both nations are focused on accelerating the development and deployment of clean energy technologies. Initiatives include:
  • Hydrogen: Collaboration on a new National Center for Hydrogen Safety in India and public-private task forces to scale hydrogen technologies.
  • Energy Storage: Establishment of an Energy Storage Task Force and pilot projects for battery energy storage systems (BESS) to integrate large-scale renewable energy into the grid.
  • Renewable Energy Technology Action Platform (RETAP): Launched in 2023 to develop roadmaps for technologies like hydrogen, long-duration energy storage, and offshore wind.
  • Financing: Efforts to operationalize the Green Transition Fund, with the U.S. International Development Finance Corporation (DFC) committed to anchor the fund with up to $500 million, to encourage private sector investment in clean energy.