India 'Collapses' as Victim of Iran War Over LPG Import Dependency
Millions of restaurants across India are reportedly on the brink of massive closure. This is a consequence of disruptions to the Liquefied Petroleum Gas (LPG) supply chain caused by the Iran-Israel war involving the United States.
As is known, the vast majority of India’s LPG is supplied through imports. The obstruction of distribution routes through the Strait of Hormuz has made the country’s energy supply critical, given that the majority of shipments must pass through this vital artery of global commerce.
Moreover, India’s Ministry of Petroleum and Natural Gas has formally instructed oil refineries to prioritise LPG supply for 330 million households as the primary cooking fuel. This policy comes at the expense of more than 3 million business operators who have relied on commercial LPG cylinders.
The Indian government, through a posting on social media platform X, stated that in addition to prioritising households, it would redirect imported liquefied natural gas for essential commercial sectors. Public facilities such as hospitals and educational institutions will gain access ahead of entertainment and food industry operations.
According to CNBC International, Sagar Daryani, President of the National Restaurant Association of India (NRAI), stated that this prioritisation policy has created an extremely alarming crisis situation. He warned that this step would force many restaurants to cease operations within the coming days.
“Approximately 90% of restaurants in India are heavily dependent on LPG cylinders to operate their kitchens. The industry is already facing low demand and high costs; if the LPG supply problem continues, it will result in business closures and job losses,” said Sagar Daryani.
The NRAI itself represents over 500,000 restaurants across India. The industry is an important economic pillar with annual turnover exceeding 5.7 trillion rupees (approximately £271 billion) and employs over 8 million workers.
Sagar Daryani added that the association is currently pressing the government to take protective measures for the culinary sector. The NRAI has requested that the government immediately classify the restaurant industry as an essential service to secure energy supply certainty.
India currently holds the status of the world’s second-largest LPG importer with consumption reaching 31.3 million metric tonnes in fiscal year 2025. A report from S&P Global noted that India’s domestic production capacity can meet only approximately 41% of total demand.
Manish Sejwal, Senior Vice President of commodity markets at Rystad Energy, explained how vulnerable India’s position is in this conflict. The dependence on sea routes that are currently in turmoil represents the primary weakness in the country’s energy resilience.
“India imports approximately 67% of its LPG requirements, with approximately 90% of these imports transiting through the Strait of Hormuz,” said Manish Sejwal.
On the Brink of Bankruptcy
The situation on the ground is deteriorating for small business operators. A hotel and restaurant advocacy group based in Mumbai, AHAR, has reported this scarcity issue to local authorities and issued stern warnings that many of their members are already on the brink of bankruptcy.
In the southern region, the situation is even more dire for hotel operators. M. Ravi, President of the Chennai Hotels Association, revealed that massive operational closures will be unavoidable in the near term due to fuel shortages.
“Nearly 10,000 business establishments will close on Wednesday across the Tamil Nadu state. This will include the majority of small and medium-sized restaurants there,” said M. Ravi.
Although the government did not initially explicitly halt total supply to hotels and restaurants, recent instructions to domestic oil marketing companies have tightened gas flows. Distributors are now prohibited from supplying remaining stocks to the commercial sector.
Chandra Prakash, President of the All India LPG Distributors Federation, confirmed that directives from the central authority are very clear. Distributors have been asked to cut off supply to the commercial sector to preserve stock reserves for the general public.
“Restaurants must seek alternative fuel sources such as firewood or kerosene or switch to electric stoves,” concluded Chandra Prakash, whose organisation represents nearly 25,000 LPG distributors in India.
A Sensitive Issue
The LPG issue is a highly sensitive political matter in India, particularly because it relates to Prime Minister Narendra Modi’s social welfare scheme that subsidises LPG for poor households. By November, the government had provided 103 million subsidised gas connections, and gas prices are predicted to become a contentious issue in elections across five Indian states in the first half of 2026.