India Considers LPG Levy to Fund $42 Billion Strategic Fuel Reserve

India is set to introduce levies on liquefied petroleum gas (LPG) and natural gas consumers to fund a strategic fuel reserve worth $42 billion. This initiative aims to safeguard against global supply disruptions, such as the recent crisis in the Middle East. The government proposes a levy of ₹1.29 per kilogram on LPG, which would increase household gas bills by approximately 2%. For natural gas, a charge of ₹1.43 per standard cubic metre is under consideration.

The plan aims to generate about $1.5 billion annually, dedicated to building the necessary storage infrastructure for fuel emergencies. Currently, India maintains government-owned crude oil reserves but lacks dedicated strategic storage for LPG and natural gas. This creates a vulnerability compared to nations like Japan and South Korea, which maintain strategic reserves covering over 100 days of demand.

The proposal introduces potential challenges, including inflationary pressure on households and higher operational costs for industries reliant on natural gas. The government is carefully weighing the benefits of long-term energy security against the immediate impact on consumer gas prices and industrial input costs.