India Prioritizes Propane, Butane for Domestic LPG Supply, Curbs Petrochemical Use

The Indian government has mandated all oil refining companies to prioritize propane and butane streams for domestic LPG production, restricting their use in petrochemical and industrial applications. This directive, issued under the Essential Commodities Act, aims to ensure uninterrupted household cooking fuel supplies. Refineries must supply LPG exclusively to public sector OMCs for domestic use, potentially impacting petrochemical output while bolstering national energy security for households.

The Central government has issued a directive compelling all oil refining companies in India to prioritize propane and butane streams for producing Liquefied Petroleum Gas (LPG), a critical domestic cooking fuel. This significant move, enacted via an order dated March 5, 2026, under the Essential Commodities Act, aims to ensure uninterrupted availability of LPG for millions of households by restricting the diversion of these crucial components for petrochemical and industrial uses. Refineries are instructed to maximize propane and butane utilization exclusively for LPG production, which must then be supplied solely to the three public sector Oil Marketing Companies: Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation. These OMCs, in turn, are mandated to distribute this LPG only to domestic households, preventing any commercial or industrial diversion. The order places strict prohibitions on using propane and butane for manufacturing petrochemical products, which previously found extensive use as feedstocks for synthetic rubber, plastics, gasoline blending, and various industrial applications like foam production and aerosol propellants. Industry observers anticipate potential impacts on petrochemical output due to these new restrictions. Authorities have warned of strict action under applicable laws for any non-compliance, with the directive coming into force immediately.