India Weighs Levy on LPG, Natural Gas Users to Finance Strategic Fuel Reserves

India is considering introducing a small levy on liquefied petroleum gas (LPG) and natural gas consumption to finance a large-scale strategic fuel reserve programme. The proposed initiative, estimated to cost around $42 billion over the next decade, follows recent supply disruptions in West Asia that exposed India's dependence on imported fuel.

The plan would mark the first time India creates strategic reserves not only for crude oil but also for liquefied natural gas (LNG) and LPG. Once completed, the reserves are expected to provide around two months of crude oil and LNG demand, along with nearly six weeks of LPG consumption during supply disruptions.

To fund the expansion, the Petroleum Ministry is considering a levy of Rs 1.29 per kg of LPG and Rs 1.43 per standard cubic metre of natural gas. Based on current consumption levels, the charges could generate nearly $1.5 billion annually, with around $460 million coming from LPG and about $1 billion from natural gas users.

The proposed LPG levy would increase the cost of a standard domestic cooking gas cylinder by roughly Rs 18, translating to an estimated two per cent rise in household gas bills. Officials are still working on the mechanism for collecting the charges, while the proposal remains under inter-ministerial consultation and awaits approval from the Union Cabinet.