Govt invokes ESMA powers, orders refiners to ramp up LPG production
New Delhi (PTI): The government invoked sparingly used emergency powers to direct oil refineries to ramp up LPG production as it looks to increase the availability of domestic cooking gas to hedge against potential disruptions from the widening Middle East conflict.
India consumed 31.3 million tonnes of LPG in 2024-25, of which only 12.8 million tonnes were produced domestically, with the remainder imported. Imports have become increasingly vulnerable as 85-90 per cent come from countries like Saudi Arabia that rely on the narrow but critical Strait of Hormuz for transit. The Strait has been effectively blocked following a week-old escalation in the region, after US and Israeli strikes on Iran prompted Tehran to retaliate against US bases in neighbouring countries.
While India has surplus oil refining capacity, it is short in LPG production. And now all public and private sector refiners have been asked to "maximise and ensure that propane and butane streams produced... are utilised for production of liquefied petroleum gas (LPG)," according to an oil ministry order of March 5.
LPG is a mixture of propane and butane.
The order, issued under the powers derived from the Essential Commodities Act of 1955 (popularly called ESMA), asked the refiners to make such LPG produced available to three public sector oil marketing companies - Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) only.
The refiners have also been barred from using the two chemicals for producing petrochemicals.
"All oil refining companies shall not divert, utilise, process, crack, convert or otherwise employ propane or butane stream for the manufacture of petrochemical products or other such downstream derivatives," the order said.
The LPG so produced is to be sold only to domestic households for use in cooking purposes, it said, adding any contravention of the order shall attract penal action.
India has 33.08 crore active LPG consumers, and the government is looking to maintain an uninterrupted supply.
Earlier, the government invoked ESMA provisions in the oil sector during the post-Ukraine war period, asking refiners to ensure domestic fuel availability and not to export, which had become lucrative due to high margins.
A top Oil Ministry official said the oil and gas supplies through the Strait of Hormuz have been impacted and the country was sourcing fuel from outside of the conflict zone.
LPG under the recently signed LPG import contract with the United States have also started coming in.
Under the deal, public sector oil companies will import about 2.2 million tonnes of LPG from the US Gulf Coast in 2026 - roughly 10 per cent of the country's annual LPG imports - in a move to diversify energy sources and bolster energy security.
While the country has adequate stock of crude oil (raw material for making petrol and diesel), as much as 30 per cent of the gas supplies have been hit.
To deal with the situation, allocation is being re-prioritised - enforcing supply cuts for some and augmenting those for critical sectors, he said.
India consumes about 195 million standard cubic meters of natural gas daily for generating electricity, producing fertilizers, turning into CNG for automobiles, piping to household kitchens for cooking and use as feedstock in industries ranging from steel to ceramic. Roughly half of this is imported.
However, India's main supplier, Qatar, has shut its liquefied natural gas (LNG) production facility after being hit by drones and missiles during the ongoing conflict. This together with restrictions in movement of ships through the Strait of Hormuz has effectively cut off 60 mmscmd of supplies.
The official said companies are looking to buy LNG - super-cooled natural gas - from elsewhere. "A company bought a cargo (shipload of LNG) just yesterday."
"We are comfortably placed. Crude oil continues to flow. Even before the conflict broke out on February 28, 55 per cent of our sourcing was from non-Strait countries, which will now go up," he said, adding the vulnerability on LPG has been addressed through the order issued on March 5.
Besides, Russian oil being made available after the US waiver for one month will further augment supplies.
"We are in a comfortable position. All our options are open. Whatever we lost in the Strait of Hormuz, we have been able to pick elsewhere," he said.
LNG is being scouted around the globe, he said, expressing optimism that more supplies will be managed in the near future.
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Gold, silver soar as US-Iran deal hopes lift bullion demand
New Delhi (PTI): Gold prices rebounded by Rs 2,900 to Rs 1.55 lakh per 10 grams in the national capital on Wednesday, while silver climbed to Rs 2.54 lakh per kilogram as easing geopolitical tensions triggered a pullback in oil rates, boosting demand for precious metals.
According to the All India Sarafa Association, the yellow metal of 99.9 per cent purity jumped by Rs 2,900, or nearly 2 per cent, to Rs 1,55,400 per 10 grams (inclusive of all taxes) from Tuesday's closing level of Rs 1,52,500 per 10 grams.
Traders attributed the surge in bullion prices to reports that Washington and Tehran are close to finalising a framework agreement to end months of conflict, raising the prospects of smoother flows through the Strait of Hormuz and easing inflation concerns tied to energy markets.
"Gold rallied strongly on Wednesday as easing geopolitical tensions triggered a sharp reversal in key macro drivers that had recently pressured precious metals," Saumil Gandhi, Senior Analyst - Commodities at HDFC Securities, said.
Silver prices also advanced for the third straight session by rising Rs 3,500, or 1.4 per cent, to Rs 2,54,500 per kg (inclusive of all taxes). The metal had settled at Rs 2,51,000 per kg in the previous session, as per the Association.
"The prospect of a diplomatic breakthrough triggered a steep decline in oil prices and the US dollar, easing concerns about inflation while boosting demand for precious metals," Gandhi said.
Globally, spot gold increased by USD 106.15, or 2.33 per cent, to USD 4,663.70 per ounce while silver gained USD 3.40, or 4.68 per cent, to USD 76.24 per ounce.
"Gold witnessed a sharp rally as markets reacted positively to reports that the US and Iran are moving closer to a one-page agreement framework aimed at ending the conflict," Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said.
Despite strong international gains, rupee strength limited the upside in domestic gold prices. The market is now highly focused on final confirmation and execution of the proposed deal, he added.
Any negative surprise or breakdown in negotiations could trigger a sharp sell-off in gold, while a successful agreement and sustained ceasefire could push the bullion prices higher in the near-term, Trivedi said.
