Commercial LPG prices have surged 79% since February as India absorbed the Strait of Hormuz blockade. The next OMC pricing decision in early July will signal whether crude's retreat reaches commercial users or stays bottled up in state-run balance sheets.
The price of a 19-kg commercial LPG cylinder has climbed 79% since late February, when the West Asia conflict shut the Strait of Hormuz to tanker traffic. State-run oil marketing companies (OMCs) have absorbed the cost on domestic cylinders – a 14.2-kg bottle rose ₹29 on June 7, the second hike since the war began – but commercial users have faced five separate revisions, each between ₹42 and ₹53.50 per cylinder.
The government is watching crude prices ease before deciding on further retail adjustments, Joint Secretary Sujata Sharma said Thursday. "The price of crude went up to USD 120 per barrel. Now it is coming down," she told an inter-ministerial briefing. "Appropriate decisions regarding retail prices will continue to be taken in line with the evolving international situation."
India imports 85-90% of its crude oil requirements, and roughly 90% of its LPG came from Gulf states before the conflict. The blockade forced a rapid diversification. According to a Crisil report, India now sources one-third of its LPG imports from the United States. Argentina, Chile, France and the Netherlands have also entered the import basket.
That trade-off came at a price. The Saudi Aramco Contract Price, the benchmark for Indian LPG imports, rose 46% between February and June. Fuel retailers incurred cumulative losses of ₹22,000 crore during March-May, absorbing the shock to shield domestic consumers.
On Thursday, Indian Oil Corp (IOC) issued tenders to charter vessels to lift LPG and crude from ports inside the Strait of Hormuz, Reuters reported. Between June 30 and July 4, IOC seeks to lift LPG from Ras Laffan in Qatar, Mina Al Ahmadi in Kuwait or Ruwais in the UAE.
Reliance Industries executive director Anant Ambani said the company increased LPG production four-fold after the conflict to meet national needs, PTI reported.
The question for traders is whether the government will pass through any of the crude-price relief to commercial cylinders – the segment that has borne the full weight of the supply shock – or continue to cross-subsidise domestic users through OMC balance sheets. The next OMC pricing decision, expected in early July, will signal the answer.
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