Oil Ministry Sets Up Panel as Commercial LPG Shortage Hits Hospitality Sector

The oil ministry has constituted a committee to examine supply issues after a sudden shortage of commercial LPG cylinders alarmed the hospitality sector, with restaurant associations warning that eateries could shut down within days if supplies are not restored.

As the widening conflict in the Middle East disrupted fuel lifelines, including India's LPG supplies, the government has prioritised domestic cooking gas supplies to households. This has led to supply crunch for hotels and restaurants which use market priced commercial LPG.

"For LPG supply to other non-domestic sectors, a committee of three Executive Directors (EDs) of Oil Marketing Companies (OMCs) have been constituted to review the representations for LPG supply to restaurants/hotels/other industries," the ministry said in a post on X.

India consumed some 31.3 million tonnes of LPG annually. As much as 87% of this is in the domestic sector i.e. household kitchens, and the rest in commercial establishments such as hotels and restaurants.

Of this total requirement, as much as 62% is met through imports. The US and Israel attack on Iran and Tehran's retaliation has shut the Strait of Hormuz - the conduit through which India got 85-90% of its LPG imports from countries like Saudi Arabia.

As alternate sources are being scouted, the limited supplies available meant the government prioritising supplies to the domestic sector, and in process the commercial establishments have suffered.

Industry sources say the disruption has already begun affecting operations in Mumbai and Bengaluru, as hotels and restaurants struggle to secure cooking gas.

Vijay Shetty, president of the India Hotels and Restaurant Association, said the shortage is spreading rapidly and could soon paralyse the sector.

While maintaining that the country has adequate fuel stocks, the ministry in recent days directed refineries to maximise LPG output by curtailing petrochemical streams and extended the LPG refill booking cycle to 25 days from 21 days.

"In light of current geopolitical disruptions to fuel supply and constraints on supply of LPG, the ministry has issued orders to oil refineries for higher LPG production and using such extra production for domestic LPG use," the ministry said in the post on X.

"The ministry has prioritised domestic LPG supply to households and introduced a 25 day inter-booking period to avoid hoarding/black marketing." Non domestic supplies from imported LPG are being prioritised to essential non domestic sectors such as hospitals and educational institutions, it said.