India ordered refineries to increase their gas production capacity in light of new energy crises

The government of India established for the first time mandatory maximum production targets for liquefied petroleum gas (LPG) for its refineries, in a measure aimed at strengthening the country's energy security and creating a response capacity to potential disruptions in international supply.

The order was issued on Thursday, August 13, by the Ministry of Petroleum and Natural Gas and affects 21 public and private refineries and oil plants. The directive sets a combined production capacity of up to 63,810 tons per day of LPG, more than double the national production recorded during the fiscal year that ended on March 31, 2026, and equivalent to approximately 70% of the country's daily consumption.

The government clarified that the facilities will not have to produce permanently at the established maximum. Instead, the quotas determine the capacity that each plant must be prepared to activate when authorities deem it necessary to respond to a potential supply crisis. In this way, New Delhi seeks to have an industrial reserve that can be activated quickly without relying solely on stored inventories or emergency purchases in international markets.

The distribution of the targets reflects the central role of state-owned companies in the strategy. The 18 public refineries must jointly achieve a capacity of 31,470 tons per day. They will be joined by ONGC and GAIL, which will contribute another 6,460 tons per day from natural gas. Meanwhile, Nayara Energy, a company partially controlled by Russian capital, received a quota of 4,480 tons per day for its refinery located in Vadinar, in the state of Gujarat.

The directive also requires companies to make technical modifications to be able to transform certain secondary inputs into LPG and strengthen the necessary infrastructure to transport and distribute the additional fuel. The goal is to reduce the reaction time in the face of an external disruption and allow the country to quickly increase its domestic supply when necessary.

The decision responds to India's high energy dependence. The country imports about 90% of the oil it consumes and around 60% of LPG, a fundamental fuel for cooking and heating in more than 300 million homes. The vulnerability is even greater because approximately 90% of the imported LPG historically passes through the Strait of Hormuz, one of the world's main energy routes.

Instability in the Middle East during the first half of 2026 highlighted the risks of that dependence. Episodes of military tension and restrictions around the strait caused a drop of nearly 85% in Indian LPG imports from the Middle East between February and June, according to sector analysis.

In light of this situation, New Delhi accelerated the search for alternative suppliers. India signed a one-year contract with the United States to import 2.2 million tons of LPG from the Gulf Coast. The volume represents about 10% of the country's annual imports and significantly contributed to increasing the U.S. share within India's supplier basket.

The need for diversification is explained by the magnitude of domestic consumption. India uses more than 31 million metric tons of LPG each year, while national production covers barely around 40% of that demand. The difference forces the country to rely on foreign suppliers and turns any disruption of international maritime routes into a potential threat to millions of households.

With the new order, the government seeks to transform the production capacity of its refineries into a tool of national security. The mechanism differs from the strategic oil reserves that India maintains in underground facilities, as it is not just about storing fuel, but ensuring that the plants can quickly ramp up production when an emergency occurs.

The regulation, however, does not set a specific date to activate the quotas or automatic conditions that trigger the increase in production. The decision will rest with the Ministry of Petroleum and Natural Gas, which can order the activation of the system depending on market conditions and supply security.

While the Strait of Hormuz remains a critical point for global energy trade, India is trying to reduce its vulnerability to future crises. The new strategy reflects New Delhi's concern to ensure the supply of LPG and have a domestic response capacity that was not previously available.