Page 45 - Policy Economic Report - March 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The LPG Control Order issued on 8 March 2026 directed all refineries to maximise LPG yields and
channel the entire output of C3 and C4 hydrocarbon streams, comprising propane, butane, propylene,
and butenes, exclusively to the three Oil Marketing Companies for domestic cooking gas. Hence, in the
last 5 days, LPG production has been increased by 28 per cent through refinery directives, and further
procurement is actively underway.

7. Commercial LPG has been regulated to prevent black marketing, not to penalise the hospitality sector.
Commercial LPG is sold in a completely deregulated, over-the-counter market at market price, without
any government subsidy. There is no registration system, no booking requirement, no digital
authentication, and no delivery confirmation mechanism. Any business or individual can purchase
cylinders in any quantity at the point of sale, with no government control in normal times. In a supply-
constrained environment where public anxiety is elevated, this deregulated structure creates a direct
and uncontrolled pathway for hoarding, diversion, and resale at inflated prices. Had commercial supply
been left entirely unrestricted, cylinders purchased over the counter could have been diverted to the
grey market at the expense of genuine commercial consumers and domestic households alike. The
government has therefore taken the responsible course: to regulate this channel with clear priorities
and a transparent allocation mechanism. A three-member committee comprising Executive Directors
from IOCL, HPCL, and BPCL was constituted on 9 March 2026. Extensive meetings have been held with
state civil supply departments and restaurant associations across the country and are continuing. The
committee has assessed genuine need by geography and sector to ensure available commercial volume
reaches genuine users first. In a major decision, 20% of the average monthly Commercial LPG
requirement will be allocated from today by OMCs, in coordination with the State Governments so that
there is no hoarding or black marketing.

8. Alternate fuel options are being activated to ease pressure on LPG and gas channels. Kerosene is
being made available through retail outlets and PDS channels, and fuel oil is being made available for
industrial and commercial consumers. The MoEFCC has advised State Pollution Control Boards to
permit, for the duration of this crisis period, the use of biomass, RDF pellets, and Kerosene/coal as
alternate fuels for the hospitality and restaurant segment for 1 month, which would enable a wider
range of establishments to switch and free up LPG for priority consumers.

9. Consumer prices have been shielded from global market conditions. Despite the Saudi Contract Price
rising 41 per cent between July 2023 and March 2026, the PMUY beneficiary price has fallen 32 per cent
in the same period and stands at Rs 613 per 14.2 kg cylinder in Delhi. The non-subsidised consumer price
stands at Rs 913 following the recent Rs 60 adjustment, against a market-determined price of
approximately Rs 987. Of the Rs 134 per cylinder adjustment required by prevailing global market
conditions, the government absorbed Rs 74. The effective additional cost for a PMUY household is under
80 paise per day. Equivalent LPG prices in the neighbourhood stand at Rs 1,046 in Pakistan, Rs 1,242 in
Sri Lanka, and Rs 1,208 in Nepal. OMC compensation of Rs 30,000 crore has been approved against
losses of approximately Rs 40,000 crore in 2024-25.

10. State governments have responded with full cooperation and active coordination. On 11 March
2026, senior OMC officials met with state administrations across every major state: Maharashtra,

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