India rations gas, turns to Russian crude

War fallout bears heavy on India’s energy markets: India has invoked emergency powers to slash industrial gas supplies and is pivoting to Russian oil under a temporary U.S. sanctions waiver while prioritizing household cooking gas needs as widespread shortages threaten to cripple the domestic economy.

Dwindling gas supplies?

The Indian government has invoked its emergency powers cutting gas supply to industries and commercial users to prioritize household supplies.

The Ministry of Petroleum and Natural Gas has ordered refiners to increase production of Liquified Petroleum Gas (LPG) to boost supplies for household use and critical non-household consumers like hospitals and educational institutions, according to a statement. The ministry has also directed retailers cut supplies to commercial clients:

• The tea industry, broader manufacturing, and other large industrial consumers, will all see their supplies cut by 20%;
• Supplies to fertilizer plants have been slashed by 30%;
• Small industries and commercial users such as restaurants and hotels will also face a 20% cut.

That is not all, the states are imposing their own cuts: The western state of Gujarat has ordered halving gas supply to industries and cutting supply to fertilizer and milk processing plants by 40%, PTI reports.

Why it matters: India imports up to 90% of its gas supplies from the GCC, with 60% of its total demand met by Saudi Arabia, Qatar, and the UAE. With shipping disrupted in Strait of Hormuz and energy majors in the Gulf cutting production, the shortages are projected to worsen in the coming days.

Industries worried about the squeeze: Although the government says the country’s energy reserves are in a “comfortable position,” industrial consumers are already bearing the brunt as priority shifts to ensuring uninterrupted supplies to households. Around 20% of the restaurants and hotels in the financial capital Mumbai have shut down due to LPG shortage, and restaurant associations warn half of them could be forced to shutter if shortages persist, according to India Today.

Steel production hit: Small Indian steel producers are preparing to reduce production amid liquefied natural gas (LNG) shortages. Several mills in Gujarat, India’s largest gas-consuming region, said they may reduce production by up to 50% if supplies do not improve within a week after city gas distributor Gujarat Gas declared force majeure and curtailed industrial deliveries. Smaller mills relying on gas-based sponge iron production are particularly exposed to the supply squeeze.

MEANWHILE- India’s fertilizer producers are scaling back output after liquefied natural gas (LNG) shipments from Qatar were disrupted by the war. Companies including Indian Farmers Fertilizer Cooperative have reduced operations at some urea plants as gas availability tightens.

Oil money goes to Russia, for now

Reliance Industries, India’s largest refiner, has secured at least 6 mn barrels of Russian oil for March delivery, Reuters reports, citing industry sources. The move is a direct response to severe supply chain disruptions in the Middle East triggered by the ongoing Iran war.

The details: The transaction was cleared after Washington granted New Delhi a 30-day sanctions waiver last week for cargoes loaded by 5 March, allowing Indian refiners to promptly scoop up 30 mn barrels of Russian oil previously stranded at sea. Reliance acquired the Russian flagship grade Urals crude at a USD 1 markdown to a USD 1 premium against dated Brent.

The vulnerability: India, the world's third-largest oil importer, typically relies on the Strait of Hormuz for roughly 40% of its total oil imports, making the current Middle East war a critical threat to its energy security.

Meanwhile- The US has signaled to European allies that any further rollbacks on Russian oil sanctions will be highly tailored and primarily limited to Indian supplies, attempting to calm concerns after President Donald Trump hinted at easing restrictions to lower global prices, according to Bloomberg. During a call with G7 finance ministers, US officials stressed that the recently granted waiver — which allows India to import Russian oil currently at sea — is strictly limited in both time and scope.

Not without hurdles: State Bank of India (SBI), India’s largest lender, is declining to process payments for Russian oil, even after Washington issued a temporary sanctions waiver for Indian imports, citing uncertainty over how long the US concession will actually last. As India’s largest lender with a substantial global loan portfolio, SBI fears that facilitating these transactions could expose the state-owned bank to severe financial risks and reputational damage in international markets.

Other energy news

Tata Group-owned Air India will introduce higher fuel surcharges across domestic and international routes beginning today amid rising aviation turbine fuel prices, according to a company statement. The surcharge will apply to flights operated by Air India and its low-cost subsidiary Air India Express. Higher aviation turbine fuel prices since early March have increased cost pressures for airlines.