India's LPG Customer Base Sees 6.2 Million Decline Amid Iran War Disruptions

India's domestic LPG customer base has declined for the first time in over a decade. With around 6.2 million households dropping off between April and August. As the Iran war disrupted supplies and prompted oil companies to tighten checks on existing customers.

The contraction in LPG customer base has been attributed to the Iran war'It was impact on LPG availability from the Gulf region. The war has led to a significant reduction in LPG imports, resulting in a shortage of the fuel.

As a result, oil marketing companies stopped issuing new connections and tightened checks on existing customers.

The Indian oil ministry has reported a significant drop in the number of active domestic LPG customers. With 327.7 million users as of September, compared to 333.9 million at the start of April. This decline marks a striking reversal from the substantial growth in the LPG customer base over the past four years.

Which averaged annual increases of 11.9% to 19.6% between 2018 and 2019.

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The decline in LPG customer base is particularly concerning in regions with limited PNG infrastructure. In southern India, the LPG customer base declined by 2.63 million from the end of March. Meanwhile, western India saw a reduction of 1.62 million, and northern India experienced a decline of 1.5 million.

The impact of the Iran war on LPG supplies has also led to a significant increase in the use of Aadhaar-based biometric verification to identify inactive customers. Multiple LPG connections within the same family, and households that already have access to piped natural gas (PNG).

This move is aimed at ensuring that LPG connections are only issued to those who need them. Thereby reducing the strain on the LPG distribution network.

As the government promotes the adoption of PNG in areas with existing infrastructure, households are increasingly opting for the cleaner-burning fuel. Over the past fiscal year, city gas distribution companies have welcomed nearly 600,000 PNG customers, bringing the total to 17.5 million. This shift is poised to ease the strain on the LPG network.

As demand for the fuel is expected to decline, providing much-needed relief to the already congested distribution system.

India's limited LPG storage capacity has become a pressing concern amid the ongoing supply chain disruptions. The country's LPG storage capacity is substantial, with a total of 1.9 million tonnes, a reserve that would last approximately 22 days.

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However, the expansion of this infrastructure has been hindered by the high cost of construction, a significant obstacle in the development of the sector.

The contraction in LPG customer base is a clear indication of the far-reaching impact of the Iran war on India's energy sector. As the situation continues to unfold, it remains to be seen how the government and oil marketing companies will address the challenges posed by the shortage of LPG supplies.

As of August 2023, the LPG customer base in Eastern India stood at 79.8 million. Meanwhile, in PNG, the number was 68.3 million. The AIQ region had 10.7 million LPG customers, and the remaining regions had 0.34 million customers.

The decline in LPG customer base has significant implications for the country's energy sector and its ability to meet the growing demand for LPG.