Oil & Gas

India is considering imposing a levy on cooking gas (LPG) and natural gas consumers to help finance a planned $42 billion strategic fuel reserve. The proposal follows supply disruptions during the Iran conflict, which exposed vulnerabilities in the country's energy supply chain. For the first time, India's strategic reserves would extend beyond crude oil to include liquefied natural gas (LNG) and LPG.

Under the proposal, consumers would pay small levies on LPG and natural gas that could generate around $1.5 billion annually. The Ministry of Petroleum and Natural Gas has proposed a charge of 1.29 rupees per kilogram of LPG and 1.43 rupees per standard cubic metre of natural gas, which would add roughly 2% to household gas bills while funding new storage infrastructure.

The decade-long programme aims to build reserves sufficient to cover about two months of crude oil and LNG demand and approximately six weeks of LPG consumption. More than half of the estimated $42 billion investment would be used to develop storage infrastructure, with the remainder allocated to purchasing and maintaining fuel inventories.

The proposal reflects India's efforts to strengthen its energy security as the world's third-largest oil importer, with nearly 90% of its crude oil imported. While the country has strategic crude oil reserves under expansion, it currently lacks dedicated strategic storage for LNG and LPG, leaving its emergency fuel reserves well below those of countries such as Japan and South Korea.c