Escalating disruptions in the Strait of Hormuz have triggered a widening energy crisis across India, slashing domestic LPG sales by over 17% in early March and threatening to paralyze key industrial sectors ranging from steel and pharma to fertilizer production. The Indian government is tapping an INR 60 bn contingency fund to secure emergency gas supplies and prevent a collapse in fertilizer manufacturing.

India’s LPG sales drop on Hormuz disruptions

Liquified petroleum gas (LPG) sales in India slowed sharply in the first two weeks of March as supply constraints linked to disruptions in the Strait of Hormuz affected deliveries, Reuters reports. State-owned fuel retailers — Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation — sold about 1.15 mn tonnes of LPG in the first half of the month, marking a 17.3% decline y-o-y and a 26.3% drop from the previous month.

Remember: India depends on the Middle East for around 90% of its LPG imports, leaving supplies vulnerable to disruption along Gulf shipping routes. The government has diverted volumes away from industrial consumers to safeguard household availability.

Gas shortages hit JSW operations

Gas shortages are beginning to disrupt operations at some steel plants of India-based metals conglomerate JSW Group, with one unit at risk of shutting down in the coming days, Reuters reports, citing an internal company note.

Limited fuel is starting to affect plant operations. JSW Steel Coated Products has flagged possible delays in meeting tinplate output targets under the government's production linked incentive program and sought extended deadlines to meet targets after the company received a force majeure notice from its supplier Petronet LNG.

Broader impact: Industry body Indian Steel Association warned that shortages of propane and LPG could affect steel MSMEs and their ancillary units. It is urging for faster and prioritized alternate sourcing.

Propane shortage disrupts India pharma output

Similar fuel shortages are beginning to disrupt pharmaceutical manufacturing, with units across key production hubs scaling back operations as propane supply tightens, Economic Times reports. Factories in Gujarat, Maharashtra, Telangana and Andhra Pradesh are seeing output disruptions, particularly in segments such as paracetamol, vitamins and hormone-based medicines. Industry estimates indicate that up to 200 manufacturers could suspend production within 7-10 days, if fuel availability does not improve.

Production risk: Industry stakeholders have flagged that prolonged shortages could begin to affect output of bulk drugs and injectables, as core processes such as steam generation and temperature-controlled manufacturing cycles face interruptions. The disruption also raises risks for supply continuity in global pharmaceutical markets that depend on Indian manufacturers.

Tapping war-chest to secure fertilizer output

Refiners are moving to secure additional LNG from the spot market through an INR 6 bn (USD 72 mn) contingency fund as gas supplies to fertilizer plants come under strain, Business Standard reports. The intervention is aimed at preventing a sharper drop in urea output, with gas availability projected could fall from the committed 70% level to around 50%, if disruption persists.

Supply stress: Some fertilizer units have advanced timelines for maintenance related pauses or cut operating rates due to limited gas supply. The government has redirected producers to prioritize urea output by diverting available ammonia to fertilizer production ahead of the summer sowing season, which accounts for a large share of annual crop production.

Cost pressure: Increased reliance on spot LNG is raising input costs, with prices crossing USD 20/mmBtu. This could push up subsidy requirements for urea — which is sold at controlled prices — adding pressure to the INR 1.16 tn subsidy allocation for FY 2026-27 if elevated gas prices persist.

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