Domestic cylinder price hiked by Rs 60: Iran war likely to lead to shortage of cooking gas; Government orders to increase LPG production

The central government has increased the price of domestic gas cylinders by Rs 60. News agency ANI quoted sources as saying that 14.2 kg of LPG gas will now be available for Rs 913 in Delhi. Earlier it was Rs 853. At the same time, the price of a 19 kg commercial cylinder has been increased by Rs 115. It will now be available for Rs 1883. The increased prices will be applicable from March 7. The government has increased gas prices at a time when there is a possibility of gas shortage in the country due to the US-Israel and Iran war. In view of this situation, the government has ordered all oil refineries in the country to increase LPG production using emergency powers. Rising tensions in the Middle East could affect gas supplies. The government issued this order keeping this threat in mind. It said refineries will now use propane and butane only to produce cooking gas. To prevent a shortage of cylinders, the government has ordered all companies to supply propane and butane to state-owned oil companies. State-owned oil companies include Indian Oil (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL). It aims to provide uninterrupted supply of gas cylinders to consumers. 2 Causes of Supply Crisis 1. The Strait of Hormuz is close to the Strait of Hormuz The biggest challenge for India is the closure of the Strait of Hormuz. It is a 167 km long waterway that connects the Persian Gulf to the Arabian Sea. This route is no longer safe due to the Iran war. No oil tanker is passing through there in view of the threat. About 20% of the world's petroleum passes through it. Countries like Saudi Arabia, Iraq and Kuwait are also dependent on it for their exports. India imports 50% of its crude oil and 54% of its LNG through this route. Iran itself exports through the same route. 2. LNG production halted due to drone attack on plant Last week, the US-Israel attack on Iran. In response, Iran has targeted US bases and ports in countries such as the UAE, Qatar, Kuwait and Saudi Arabia. After Iran's drone attack, Qatar, the largest gas supplier to India, has stopped the production of its LNG plant. This has reduced the supply of gas in India. India imports 40% of its LNG (about 27 million tonnes annually) from Qatar. In view of the shortage of gas, the Association of CGD Entities (ACE) has written a letter to the state-owned GAIL seeking clarification. The companies say that if they do not get cheap gas coming from Qatar, they will have to buy expensive gas from the 'spot market'. Impact of the government's order on private companies The government's decision may have a direct impact on private sector companies, especially Reliance Industries (RIL). Diversion of propane and butane will reduce the production of alkylates which are used to improve the grading of gasoline. Experts and trade sources say that the use of propane and butane in making LPG instead of petrochemicals will affect the margins of the companies. Petrochemical products like polypropylene and alkylates are sold at a better price than LPG. Relief talk: India is not relying on the Hormuz route alone The situation is challenging, but the government has made it clear that there is no need to panic: Dependence on Russia: India is now importing 20% of its crude oil requirement from Russia (10.4 million barrels per day in February), which reduces its dependence on the Hormuz route. Sufficient stocks: According to sources, the country currently has sufficient stocks of petroleum and LPG. The news of the closure of refineries like MRPL is just a rumor. Knowledge Box: 1. What is the Essential Commodity Act 1955 The government has issued this order using the powers granted under the Essential Commodities Act 1955 (ESMA). Earlier, the government implemented ESMA rules in the oil sector after the war in Ukraine. At that time, the refining companies were told not to allow there to be a shortage of fuel in the country and not to export it, as selling oil abroad had become a very lucrative deal due to huge margins at that time. 2. Learn the uses of propane-butane and LNG