India to source a tenth of its LPG imports from US in 2026; deal to boost American exports to India 3%

In a fillip to American exports to India, public sector oil companies Indian Oil Corp. Ltd, or IOC, Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) have signed a one-year term deal to import 2.2 million tonnes of liquified petrolrum gas from the US Gulf Coast in 2026.

This is the first term contract for LPG supplies from the US. Earlier, imports of LPG, primarily used for cooking in Indian homes, from the US were via deals done on the spot market.

Details of the deal were not immediately available but petroleum minister Hardeep Singh Puri said on social media it would account for about 10% of India's LPG imports. Imports of the cooking gas have so far been dominated from Qatar, the UAE, and Saudi Arabia through long-term contracts.

India's LPG imports in FY25 stood at $12.47 billion, 10% of which would be about $1.25 billion. Based on this calculation, this deal will increase the US's annual exports to India by about 3%.

Earlier on Monday, in a post on the social media platform X, minister Puri wrote: “A historic first! One of the largest and the world's fastest-growing LPG market opens up to the United States. In our endeavour to provide secure, affordable supplies of LPG to the people of India, we have been diversifying our LPG sourcing.”

Pointing to India's position as one of the largest and fastest-growing LPG markets in the world, Puri clarified that the purchase price has been compared to Mount Belvieu, a reference for global LPG pricing.

Teams from IOCL, BPCL, and HPCL had recently travelled to the US for discussions with leading American producers, he added in the tweet.

India LPG market

The minister recognised India's position as one of the largest and fastest-growing LPG markets across the globe, saying that the new agreement marks a significant milestone in the country's efforts to diversify its LPG sources.

Monday's deal comes at a time when a India-US bilateral trade deal is expected to be finalized soon. The LPG contract supports the target set by both countries earlier this year to increase energy trade to $20 billion. Besides LPG imports, India plans to increase crude oil and liquefied natural gas (LNG) imports. LNG finds use as a commercial energy source.

LPG used in India comprises 60% butane and 40% propane. West Asian exports are better suited for this as they are primarily butane-dominated, since their LPG production is a byproduct of oil processing. On the other hand, US supplies are primarily propane-dominated, as LPG production in the US is the byproduct of natural gas processing.

For India, importing LPG from the US may add to the import bill due to the higher cost of freight but an expert suggested that low global prices may have found favour in the deal. “Also, amidst the ongoing trade talks and commitment to increase energy ties, these contracts have been on expected lines,” said Prashant Vasisht, senior vice president and co-group head, corporate ratings, ICRA Ltd. “Further diversifying import sources also adds to energy security efforts.”

India's energy imports from the US have been on the rise in recent years. According to data from Kpler, India's crude oil imports from the US reached the highest level since 2022 in October this year at some 540,000 barrels a day.

Rising LPG costs

LPG is a key cooking fuel in the country. Under the Pradhan Mantri Ujjwala Yojana, the government has been promoting LPG as a replacement for firewood for people below the poverty line. At the start of FY26, the three state-run oil marketing companies which dominate the LPG market in India, together had 32.97 crore active LPG customers.

Puri emphasized that the government's aim to provide affordable LPG to Indian households has particularly benefited women. He highlighted that despite a more than 60% increase in global LPG prices last year, Prime Minister Narendra Modi made sure Ujjwala consumers paid only ₹500-550 per cylinder, even though the true cost exceeded ₹1,100.

To protect consumers from international price shocks, the Government of India absorbed a burden of over ₹40,000 crore during the year.

He also mentioned that the new US import agreement strengthens the government's continual efforts to ensure reliable and affordable energy supplies for the country.

(With inputs from agencies.)