LPG constraints: India's auto industry braces for impact on production

Siam asks MoPNG to give clarity on availability

The Indian automobile industry is bracing for possible production disruptions as the government moves to prioritise petroleum gases for domestic cooking fuel amid the continuing conflict in West Asia, industry executives told Business Standard on Monday.

 

The Society of Indian Automobile Manufacturers (Siam) held an internal meeting with member companies on Monday and subsequently wrote to the Ministry of Petroleum and Natural Gas (MoPNG), seeking clarity on the availability and supply visibility of liquefied petroleum gas (LPG), piped natural gas (PNG), and propane. These fuels are widely used in automobile and auto-component manufacturing plants. Siam said advance visibility on their supply would help companies minimise disruption, if any, to production and enable them to be better prepared.

 

Spokespersons for Siam and the ministry did not immediately respond to queries sent by Business Standard.

 

Siam's concern follows a “revised” order issued by the MoPNG on Monday, directing refineries and petrochemical complexes to prioritise production of LPG for domestic cooking use, expanding the scope of an earlier directive issued on March 5.

 

The March 5 order had asked all oil refining companies to maximise the use of propane and butane streams — gases produced during the refining of crude oil — for LPG production, and supply the output only to the three state-run oil marketing companies, Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL), which distribute cooking gas cylinders across the country. Refineries were also barred from diverting these gases to produce petrochemical derivatives such as plastic and chemical feedstocks.

 

The revised order significantly widens the scope of the March 5 directive. It covers the entire “C3 and C4 streams”, which are a group of light hydrocarbon gases produced in refineries that includes propane, butane, propylene, and butenes. These gases are typically used either to produce LPG or as raw material for petrochemical products.

 

In automobile production and related petrochemical industry, C3 and C4 streams refer to specific hydrocarbon fractions produced during the refining of crude oil or naphtha steam cracking, which are used to create fuels, plastics, and various chemical components for vehicles.

 

Under the new order, refineries and petrochemical complexes must channel these streams primarily towards LPG production, and supply them only to the three public sector oil marketing companies (OMCs) for distribution to domestic LPG consumers. The Monday order also extends the restriction to petrochemical complexes and refinery units operating in special economic zones (SEZs).

 

Industry executives said the move could have implications for the automobile as well as auto-component companies because LPG, propane, and PNG are widely used in factories as they provide "clean and controllable heat" required for several critical manufacturing processes.

 

In auto-component plants, LPG-fired or propane-fired furnaces are commonly used for forging, casting, and heat treatment of metal parts such as crankshafts, gears, steering knuckles, and connecting rods. These processes require high and consistent temperatures to shape and strengthen metal components before they are assembled into vehicles, the executives informed.

 

The gases are also used in brazing, soldering, and welding operations, where controlled flames are required to join aluminium, copper, and steel parts in assemblies such as radiators, fuel lines, and air-conditioning systems. In automobile plants, LPG or PNG burners are frequently used in paint-curing and powder-coating ovens where vehicle bodies and components must be dried and hardened at specific temperatures to ensure durable paint finishes, they mentioned.

 

Factories also use LPG or PNG in industrial boilers and thermic fluid heaters that generate steam and heat for processes such as washing, drying, and degreasing of parts before they move to subsequent production stages, they said. In addition, gas-fired systems are used in component cleaning lines while LPG-powered forklifts are commonly deployed inside manufacturing facilities for material handling because they can operate safely indoors.

 

The MoPNG’s Monday order could also affect the petrochemical supply chain that feeds into the automobile industry. C3 and C4 streams are important feedstocks for producing petrochemicals used in plastics, synthetic rubber, foams, and adhesives that go into automotive components such as dashboards, bumpers, wiring insulation, and interior trims. Any restriction on their use for petrochemical manufacturing could tighten feedstock availability and raise input costs for automakers and component suppliers, the executives said.