Chinese import tariffs have unwittingly come to India’s assistance to help boost imports of US liquefied petroleum gas (LPG) at rates cheaper than what it pays for supplies from West Asia, according to industry sources and shipping data.
After stepping up crude imports and tying up US liquefied natural gas (LNG) supplies, Indian state-run oil companies are evaluating options for LPG imports from the US in July, directly under term contract arrangements — when they begin talks to secure shipments of the cooking fuel for 2026, top refining sources told Business Standard.
Talks are also on to secure cheap US LPG in the immediate term in exchange for contracted West Asian supplies. India is a $12 billion LPG market, equivalent to a third of its trade surplus with the US for 2024.
India's LPG market is dominated by supplies from United Arab Emirates, Qatar, Kuwait, and Saudi Arabia.
The advent of US LPG will enhance India’s security of supply for a sensitive fuel, used in kitchens across the nation, an official said.
India imported around 20.8 million tonnes of LPG, around 66 per cent of its needs, in 2024-25, according to oil ministry data.
The US share was negligible.
“Cheap US LPG is flooding the market,” an official from a state refiner said, adding that with the right discounts US suppliers could capture a large portion of the Indian LPG market, just as discounted Russian oil gobbled up 40 per cent of India’s crude oil import business after the war in Ukraine and accompanying sanctions, the official said.
It depends on how long the Chinese import tariffs last, another official said.
The availability of US LPG was driven by the steep 145 per cent tariffs imposed by the Trump administration last month on most Chinese imports, leading to China retaliating with a 125 per cent charge on US purchases.
The import tax increased costs for Chinese LPG importers, forcing them to turn to West Asia for supplies.
The US accounted for half of China’s LPG imports in 2024 at 18 million tonnes, ship tracking data shows.
Trade talks
India’s resolve to step up imports of US LPG will help boost its bargaining position in ongoing trade talks with the US.
The Trump administration has singled India out over two issues — high tariffs and non-tariff barriers and a huge trade surplus.
LPG, together with enhanced crude and LNG purchases may help address the second concern, a government official said.
India bought a combined 2 million tonnes of LPG during Trump’s first term in the 2019-21 period, before purchases plunged in 2022-24 during the Biden administration by more than half.
Signs of higher US energy purchases are already visible.
Indian Oil, Gail India, Hindustan Petroleum, and Bharat Petroleum have together tied up around 10 million tonnes LNG on a cumulative basis over five years, company officials said.
These volumes, equivalent to around 35 percent of India’s annual LNG imports, have been secured at prices linked to US gas benchmark Henry Hub, sending a message to the Trump administration that India is serious about US LNG imports.
It is unclear, however, if all the LNG will be sourced from US projects.
LPG, which is a blend of propane and butane. is produced duing the refining process and is also available while extracting natural gas; LNG is natural gas liquefied at -162 degree centigrade for ease of transportation. Both fuels are used for cooking, transport and industries.
US LPG imports may also increase in the next few months, industry officials said. Supplies may surge to 230,000 tonnes in May compared to a combined 24,000 tonnes in the January-April period, according to estimates based on ship tracking data from market intelligence agency Kpler.
A refining source dismissed the estimates as very optimistic but said that they expected higher shipments in June and July.
Indian Oil secured a cargo of US LPG recently at a discount of around $15 per tonne compared to what it would pay for West Asian supplies, a trader said.
There could be more of such transactions where Indian refiners get to save as much as $20 per tonne, around 2-3 per cent of the cargo cost, the refining source said.
Typically, India’s LPG sourcing contracts are pegged to the Saudi LPG contract price, announced every month. Shipments are on a freight on board (FOB) basis and India sends its ships to pick up the cargoes.
For US LPG, the traders will deliver to India at rates that India pays for West Asian cargo on FOB terms, thereby enabling savings on transport costs, the official explained.
Cheaper US LPG will also help state-run refiners, led by Indian Oil, to reduce losses on domestic LPG sales.
LPG under recovery for Indian Oil for the January-March quarter was ₹5,600 crore, with 2024-25 revenue losses at ₹19,900 crore.
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