IndianOil LPG production rose by nearly 30% during the West Asia supply shock as the company ran refineries above nameplate capacity and shifted away from disrupted Middle Eastern crude grades. The result shows how refinery flexibility protected domestic cylinder supply—but it does not mean India’s import dependence has disappeared.
Key takeaways
- IndianOil says it increased LPG production by nearly 30% during the Strait of Hormuz disruption.
- Its refineries ran above 100% utilisation; FY26 crude throughput reached a record 75.45 MMT at 107.4% utilisation.
- India imports about 60% of the LPG it consumes, and roughly 90% of those imports normally pass through Hormuz, according to the petroleum ministry.
- Higher refinery output buys time and protects priority customers, but diversified imports, shipping and storage remain essential.
The figures appeared in IndianOil chairman A S Sahney’s FY26 communication and his address around the company’s 67th annual general meeting on 31 August 2026. Indian Oil Corporation Limited is India’s largest fuel retailer and an integrated refiner, pipeline operator and marketer.
Everyone else is reporting a 30% jump; we are explaining what the company changed inside its refineries, why the increase mattered, and where India’s LPG security still has a structural gap.
What the IndianOil LPG increase means
IndianOil’s official chairman’s communiqué says disruption to traditional supply chains forced a significant shift away from Middle Eastern crude grades. Despite that change, refineries stayed above 100% utilisation and LPG production increased by nearly 30% to meet domestic demand.
The percentage describes an emergency operational response, not a permanent 30% increase in India’s total LPG supply. IndianOil did not state in the chairman’s passage that all incremental output would continue indefinitely, and the company did not erase the country’s need for imported LPG.
The IndianOil LPG response reduced the immediate risk of a domestic shortage by converting more available refinery feedstock into LPG while imports through Hormuz were disrupted. It was a resilience measure: domestic production absorbed part of the shock, giving importers and policymakers time to redirect cargoes and protect household supply.
How a refinery can make more LPG
LPG is a mix dominated by propane and butane. Refineries recover these light hydrocarbons while processing crude oil, while gas-processing facilities also separate them from natural-gas streams. A refinery can adjust operating conditions, feedstock selection and product yields within technical and safety limits.
That flexibility is not infinite. Maximising LPG can affect yields of petrol, diesel, petrochemical feedstocks and other products. Different crude grades also behave differently inside a refinery, which is why changing suppliers during a shipping crisis is an operational challenge rather than a simple purchasing decision.
IndianOil’s scale helped. The company reported record FY26 crude throughput of 75.45 million metric tonnes, up from 71.56 MMT in FY25, with refinery utilisation at 107.4% of installed capacity. In the June quarter of FY27, management said refineries processed 19.17 MMT at 109.4% utilisation.
| Indicator | Reported level | What it shows |
|---|---|---|
| FY26 crude throughput | 75.45 MMT | Highest annual refinery processing volume |
| FY26 refinery utilisation | 107.4% | Operations above rated nameplate capacity |
| FY27 Q1 throughput | 19.17 MMT | High run-rate continued into the new year |
| LPG production response | Nearly +30% | Temporary yield and output push during disruption |
Why the Strait of Hormuz created a supply shock
The Strait of Hormuz is the narrow sea route connecting the Persian Gulf with the Gulf of Oman. A large share of global oil and LPG trade moves through it. War risk, shipping restrictions or insurance constraints can interrupt cargoes even without permanent physical closure.
India’s Ministry of Petroleum and Natural Gas said in March 2026 that imports meet about 60% of national LPG consumption and roughly 90% of those imports pass through Hormuz. Those figures explain why a regional maritime disruption quickly becomes a household fuel-security issue in India.
The government’s official March update said domestic LPG production had increased by 25% across the system following government measures, while a committee reviewed supply to restaurants, hotels and commercial users. IndianOil’s later “nearly 30%” figure relates to its own operational response and should not be confused with the earlier national figure.
That reconciliation matters: 25% and nearly 30% are not necessarily contradictory because they use different reporting scopes and moments. The first was a government-wide snapshot; the second was IndianOil’s company-level account.
How IndianOil protected supply
Refinery optimisation was one layer. A second was crude diversification. Sahney said the company shifted significantly away from Middle Eastern crude grades as traditional supply chains were disrupted. Buying alternative grades reduces reliance on one corridor but can increase freight, complexity or processing costs.
A third layer was product prioritisation. During the March disruption, authorities prioritised domestic household LPG and monitored commercial supply. That approach protects cooking fuel for households but can temporarily tighten availability for lower-priority industrial or hospitality users.
A fourth layer was logistics. Supply security depends on ships reaching ports, terminals unloading safely, pipelines and trucks moving product, bottling plants filling cylinders and distributors maintaining delivery. Refinery production alone cannot solve a last-mile bottleneck.
What the 30% increase does not prove
It does not prove that domestic production can replace all disrupted imports. If approximately 60% of consumption is imported, even a large percentage increase from a smaller domestic base may leave a substantial absolute gap.
It also does not reveal the cost of the response. Alternative crude, longer shipping routes, higher insurance and running plants hard can affect margins and maintenance schedules. Energy security sometimes requires paying for redundancy that looks inefficient in calm markets.
Nor does it show how long the higher LPG yield can be sustained without changing production of other fuels. The economically optimal product mix after shipping normalises may differ from the emergency mix.
Why diversification still matters
India can reduce corridor concentration by sourcing more LPG from the United States and other non-Gulf suppliers, expanding storage and keeping a broader shipping portfolio. Diversification does not always mean lower cost; its value is that one regional shock does not block the whole supply chain.
Our report on Indian LNG imports reaching a six-year high covers a related but distinct fuel market. LNG is methane used as natural gas, while LPG is mainly propane and butane. The two are not interchangeable in cylinders or infrastructure, but both expose India to shipping and international prices.
The IndianOil capacity plan explains why the company is expanding refining even while investing in gas and clean-energy businesses. More flexible capacity can improve shock absorption, though it also locks in long-lived hydrocarbon assets.
Domestic upstream output is another part of the resilience picture. Our analysis of ONGC’s deepwater programme shows why producing more energy at home is strategically attractive but slow, capital-intensive and uncertain.
What policymakers and consumers should watch
The first indicator is import-route concentration. A falling share through Hormuz would show real diversification, although the replacement routes may be longer. The second is days of usable inventory across terminals, bottling plants and distribution depots.
The third is refinery reliability. Utilisation above 100% demonstrates strong operations, but planned maintenance cannot be postponed indefinitely. Resilience requires spare capacity and maintained equipment, not only maximum throughput.
The fourth is transparent separation of household, commercial and industrial supply. Aggregate availability can hide shortages in one region or customer segment. Clear reporting reduces panic booking and helps businesses plan.
A fifth indicator is the cost of emergency resilience. Freight, insurance, alternative crude premiums and refinery adjustments should be assessed alongside physical availability, because secure supply must also remain financially sustainable.
The bottom line is that IndianOil LPG production responded effectively to an extraordinary disruption. The nearly 30% rise showed operational agility, but the durable lesson is broader: India needs domestic flexibility, diversified imports, storage and last-mile logistics working together before the next corridor shock arrives.
FAQs
How much did IndianOil increase LPG production?
IndianOil’s chairman said the company increased LPG production by nearly 30% during the West Asia supply disruption while refineries operated above 100% utilisation.
How dependent is India on imported LPG?
The petroleum ministry said imports meet about 60% of India’s LPG consumption and roughly 90% of those imports normally pass through the Strait of Hormuz.
Why are the 25% and 30% figures different?
The government reported a roughly 25% national production increase during March measures, while IndianOil later reported its own company-level increase of nearly 30%. They cover different scopes.
Does higher refinery output eliminate LPG shortage risk?
No. It reduces immediate pressure, but India still needs imports, ships, terminals, storage, bottling capacity and distribution to meet total demand.
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