India Eyes User Levies for Strategic Fuel Reserve Fund

India is considering introducing user levies on cooking gas and natural gas consumers to help fund its proposed $42 billion strategic fuel reserve. The reserve, which will be sufficient to meet two months of crude oil demand, six weeks of liquefied petroleum gas consumption, and one month of liquefied natural gas demand, was formulated in response to supply chain disruptions caused by the Iran war.

The plan would fund cooking and natural gas storage infrastructure through user levies, which could generate around $1.5 billion each year. The Ministry of Petroleum and Natural Gas has proposed a levy of 1.29 Indian rupees ($0.0136) per kilogram of LPG, estimated to generate about $460 million annually at current usage levels.

The proposed levies would add around 2% to household gas bills, which could be a politically sensitive move for Modi's government as it raises costs for millions of consumers amid elevated fuel prices. The funding mechanism has not previously been reported and is still under discussion among various ministries.