Why India built crude reserves but not LPG buffers despite demand surge

India built crude reserves for energy security but LPG was never treated the same way even as demand surged. Experts explain what held back storage planning

India’s LPG supply has come under strain after disruptions in the Strait of Hormuz, a key global shipping route through which nearly 90 per cent of the country’s imports pass. With India importing about 60 per cent of its cooking gas needs, the current crisis has exposed vulnerabilities in the supply chain.

 

The disruption has brought renewed attention to a key gap in India’s energy security framework: while the country maintains strategic reserves for crude oil, no such buffer exists for LPG.

 

This comes even as India’s cooking gas consumption expanded rapidly over the past decade, driven primarily by the rollout of the Pradhan Mantri Ujjwala Yojana (PMUY). The country now has around 330 million LPG connections, including more than 105 million beneficiaries under the scheme, pushing consumption from 21.6 million tonnes in FY17 to about 31.3 million tonnes in FY25.

 

 

Daily consumption has reached roughly 80,000 tonnes, with households accounting for the bulk of demand.

 

Yet, even as access widened, storage buffers did not grow in tandem.

 

Nilanjan Banik, professor of economics and finance at the School of Management, at Mahindra University, said the expansion should ideally have been matched with stronger supply safeguards.

 

“The government should have expanded long-term LPG storage capacity alongside PM Ujjwala Yojana's growth to better mitigate supply risks, though costs and logistics pose hurdles. PM Ujjwala added over 100 million connections since 2016, tripling imports to 20 million tonnes by 2024–25,” he said.

Why does India have crude reserves but no LPG buffers?

India maintains strategic petroleum reserves (SPR) at Visakhapatnam, Mangaluru, and Padur, covering about 9–10 days of crude oil demand. But no such national buffer exists for LPG.

 

The reason lies as much in physics as in policy.

 

“LPG lacks a comparable policy due to storage and supply differences. As a pressurised propane-butane mix, LPG requires costly high-pressure or cryogenic facilities; unlike crude oil, which suits natural caverns,” Banik explained.

 

He added that India’s LPG system operates on a fundamentally different model.

 

“LPG relies on a just-in-time distribution model serving 330 million households, prioritising continuous flow over strategic stockpiling,” he said.

How much LPG can India currently store?

Government data shows India’s LPG storage remains limited and largely operational rather than strategic. Bottling plants typically hold 4–7 days of stock, with an all-India average of about six days. Including terminals and commercial inventories, total storage rises to around 22 days.

 

This is significantly lower than crude oil, where combined reserves and commercial stocks provide roughly 74 days of cover.

 

The current LPG buffer is designed to keep supply chains moving, not to withstand prolonged disruptions.

What are the infrastructure and cost barriers?

Building a strategic LPG reserve is not just a policy decision; it is a capital-intensive engineering challenge.

 

“LPG storage in underground caverns faces greater technical hurdles than crude oil due to its pressurised liquid state and sensitivity to pressure changes,” Banik said, noting that salt caverns can deform under such conditions.

 

He added that specialised infrastructure raises costs significantly and limits scalability.

 

Rajeev Sharan, head of research at Brickwork Ratings, backed this point, saying any national buffer would require massive investment.

 

“Building a national LPG reserve would need large-scale investments in special storage tanks, pipelines, and safety systems. Setting up reserves for even a few days of use could cost several billion US dollars,” he said.

Is this a policy gap or a structural constraint?

Unlike crude oil, which can be stored cheaply in underground caverns for long durations, LPG requires pressurised and temperature-controlled facilities, making storage significantly more expensive per tonne.

 

At the same time, India’s LPG supply chain has evolved around a continuous import-and-distribute model, reducing the immediate need for large static reserves but increasing dependence on uninterrupted flows.

How does import dependence increase vulnerability?

As mentioned earlier, India now imports about 60 per cent of its LPG, with nearly 90 per cent of shipments passing through the Strait of Hormuz, a major global chokepoint, which was closed by Iran after Israel and the United States struck Tehran.

 

This high dependence, combined with limited storage, leaves the country exposed to geopolitical shocks.

Are LPG reserves the solution?

While a strategic LPG reserve could provide short-term relief during supply shocks, experts caution against viewing it as a standalone fix.

 

“Establishing a dedicated LPG reserve could offer a buffer, but such stockpiles are expensive and can only cover demand for a limited time,” Sharan said.

 

He argued that energy security requires a broader approach. “India’s energy resilience should rest on layered strategies rather than reliance on a single measure,” he said.

Should India revisit LPG buffer plans?

With demand expected to remain strong due to household consumption and welfare schemes, the case for revisiting LPG buffers is gaining ground.

 

“A modest, well-targeted buffer would provide short-term relief during supply shocks, but reserves should complement, not replace, long-term strategies like diversifying supply and modernising distribution,” Sharan said.

 

India’s LPG story showcases a growing contradiction: while access to clean cooking fuel has expanded to millions of households, the systems designed to secure its supply have not kept pace.