Panicked Indians are scrambling to buy gas

JUST BEFORE midday on March 17th, the Nanda Devi docked at Vadinar in western India. Three days before, the giant tanker had managed a feat that a month ago would have been entirely unremarkable: it passed through the Strait of Hormuz. The Nanda Devi is one of two Indian liquid petroleum gas (LPG) tankers that have made it through the choke point following negotiations with Iran’s government. Together they were carrying some 93,000 tonnes of LPG, enough to supply India for roughly one day.

That will bring a measure of relief to a country experiencing a fearsome gas crunch. Restaurants all over India have closed their doors for lack of gas to cook with. Roadside stalls have hiked their prices. Gas-dependent businesses from fertiliser plants to crematoriums have paused operations. In many cities people have had to join long queues to get the gas cylinders they use to heat food (only around 5% of Indian homes have piped gas). Shyam Kumar, a vegetable seller from Delhi, told the Indian Express his family had been left eating roti (flatbread) and bananas.

India consumes around 31m tonnes of LPG each year, most of it used for cooking. Around 60% of that is imported, making India the world’s second-largest importer after China (see chart). Before the war some 90% of those imports came from Qatar and other countries in the Middle East, via the Strait of Hormuz. With little in storage, India has been left scrambling. “This is not a normal energy-price shock but one where you are worrying about sufficient physical volumes,” says Sonal Varma of Nomura, an investment bank.

The country is vulnerable in part because of a past success. In just over a decade the number of Indian households using LPG has more than doubled, thanks to welfare schemes that have encouraged people to switch to gas from firewood, which is time-sapping and unhealthy. But as demand for LPG has soared, India has done little to boost domestic production or diversify its supply.

The government is now trying to do both at speed. It is competing for replacement shipments from countries including America, Australia and Russia. In the meantime it has turned to rationing. Ministers insist that there will be enough gas for households, even if industry and businesses end up having to accept constraints. But getting the fuel to those who need it most is proving easier said than done.

Bookings for domestic gas cylinders are running at around 40% above the usual level. That is because households are ordering replacements before they really need them, for fear supplies will run out. Indians have not found official messaging very reassuring. On March 11th Narendra Modi, the prime minister, said there was “no need to panic”. But he also invoked memories of the pandemic by saying, “Like covid time, we will overcome this too.”

Gas cylinders are supplied by state-owned oil companies, through 26,000 dealers. But stock is going missing as black-market prices soar. Refilling a standard 14kg cylinder now costs around 4,000 rupees ($43) on the black market, four times the government’s fixed price. “There are dodgy actors out there taking advantage,” says Ashok Malik of The Asia Group, a consultancy.

The urban poor are most exposed to black-market prices. Many lack the permits required to buy gas from official vendors. Even in normal times they often rely on secondary dealers. The government says it will crack down on hoarding and profiteering, but so far authorities have announced only a handful of arrests.

If India can secure the safe passage of more tankers through the Strait of Hormuz, it would help ease the pressure. The government has said that 22 more of its oil and gas tankers are waiting to make the journey (gas is more of a worry for India than oil: it has greater reserves of the latter, and can assuage shortages by buying more Russian crude). Subrahmanyam Jaishankar, India’s foreign minister, suggested its agreements with Iran could be a template for other countries. Even so, he admitted the scope was limited, with any further movements to be negotiated on a ship-by-ship basis. As the Nanda Devi was crossing the strait on March 14th, a port in the United Arab Emirates where another Indian tanker was loading oil was attacked by Iranian drones.

Ms Varma says that until global supply is restored and prices start to normalise, diplomatic efforts to release individual ships are only likely to help at the margins. If the Strait of Hormuz stays mostly closed, the Indian government may be pushed to consider more drastic measures to suppress demand—such as encouraging more people to work from home. ■