Government Prioritises Domestic LPG Supply; Refiners Told Not to Divert Propane/Butane to Petrochemicals
Government’s priority at the moment is to safeguard household energy security and maintain stable LPG availability across the country
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In a high-level meeting of the Ministry of Petroleum and Natural Gas chaired by Union Minister Hardeep Singh Puri in New Delhi yesterday, the government decided to prioritise domestic LPG availability by directing refiners not to divert propane and butane streams to petrochemical production.
The move comes amid rising global energy uncertainties and aims to ensure uninterrupted supply of cooking gas to households across the country.
Refiners Directed to Maximise LPG Production
According to the directive issued after the meeting, all oil refining companies in India have been instructed to maximise production of propane and butane and utilise these streams for the manufacturing of Liquefied Petroleum Gas (LPG).
The LPG produced from these streams must be supplied only to the three public sector oil marketing companies — Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited.
Ban on Petrochemical Diversion
The government has clearly barred refiners from diverting, processing, cracking, or using propane and butane for petrochemical products or downstream derivatives. The decision effectively channels these feedstocks toward cooking gas production instead of petrochemical manufacturing.
Public sector oil marketing companies have also been directed to ensure that the LPG procured under this order is supplied strictly to domestic LPG consumers.
Legal Action for Violations
The order warns that any violation will attract action under the Essential Commodities Act, 1955 and the Petroleum Products (Maintenance of Production, Storage and Supply) Order, 1999.
The directive has come into effect immediately and will remain valid until further orders from the Central Government.
Policy Impact: Profitability Concerns for OMCs
While the decision strengthens domestic LPG supply security, industry analysts say it could put additional pressure on the profitability of oil marketing companies.
Public sector OMCs are already facing potential margin stress due to rising crude oil prices and the weakening rupee. At the same time, retail fuel prices have remained largely unchanged as the government has not allowed pump price increases.
The new directive may therefore increase operational and supply-side costs for the companies, especially if global LPG and crude prices continue to rise.
However, officials say the government’s priority at the moment is to safeguard household energy security and maintain stable LPG availability across the country.
