The Indian government is exploring a proposal to impose a new levy on liquefied petroleum gas (LPG) and natural gas users to finance a vast $42 billion strategic fuel reserve program. This ambitious plan seeks to enhance India's energy security by expanding its strategic stockpiles beyond crude oil to include LPG and liquefied natural gas (LNG).
Proposed Levies and Financial Impact
Sources indicate the Petroleum Ministry is considering a charge of ₹1.29 per kilogram on LPG, which would increase the cost of a standard domestic cooking gas cylinder by approximately ₹18. For natural gas, a levy of ₹1.43 per standard cubic meter is proposed. These new charges are projected to generate around $1.5 billion annually, with LPG contributing about $460 million and natural gas approximately $1 billion.
If approved, household gas bills could see an increase of about 2%.
Expanding India's Energy Security Strategy
The strategic fuel reserve program, estimated to cost $42 billion over the next decade, would allocate more than half of its budget to building new storage infrastructure. The remaining funds would be used to stock the reserves. This initiative is a direct response to vulnerabilities exposed by global supply disruptions, such as those during recent West Asia conflicts, which highlighted India's heavy reliance on imported fuel.
India, the world's third-largest importer and consumer of crude oil, meets nearly 90% of its crude requirements through imports. The proposed plan aims to secure fuel stockpiles sufficient to meet roughly two months of India's crude oil and LNG demand, alongside about six weeks of LPG consumption.
Infrastructure Goals and Approval Process
Over the next ten years, the government estimates a need for an additional 28 million metric tonnes of crude storage capacity, 9 million tonnes for LNG, and 4 million tonnes for LPG. While crude oil reserves and their inventories will continue to be centrally funded, the new levies are specifically intended to finance the storage infrastructure for LPG and natural gas.
The proposal is currently under discussion across various ministries and has not yet received approval from Prime Minister Narendra Modi's Cabinet. The exact mechanism for collecting these proposed levies is also still being determined.