India is considering a new funding mechanism to strengthen its energy security by imposing a charge on cooking gas and natural gas consumers to support the creation of a $42 billion strategic fuel reserve.
The proposal comes after disruptions caused by the Iran conflict exposed vulnerabilities in global energy supply chains.
Strategic Reserve To Include LPG And Natural Gas
The proposed reserve would mark a major expansion of India’s strategic fuel storage programme, which currently focuses mainly on crude oil reserves. Under the plan, the country would build storage capacity for crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG).
The planned reserves are expected to cover around two months of crude oil and LNG demand, while LPG stocks would be sufficient for nearly six weeks of consumption, according to sources familiar with the proposal.
The Ministry of Petroleum and Natural Gas is examining a levy-based funding model to finance LPG and natural gas storage infrastructure. The proposed charges could generate around $1.5 billion annually, Reuters reported.
According to the sources cited in the report, the government is considering a levy of ₹1.29 per kg on LPG consumption, which could raise nearly $460 million every year based on current usage levels. The charge would increase the price of a standard domestic LPG cylinder by around ₹18.
For natural gas consumers, the proposed levy is ₹1.43 per standard cubic metre, which could generate approximately $1 billion annually at current consumption levels.
Proposal Yet To Receive Cabinet Approval
The exact mechanism for collecting the levies has not been finalised, and the proposal is still under discussion among various ministries.
The funds generated would mainly be used to develop LPG and natural gas storage facilities, while crude oil reserves and other strategic fuel inventories would continue to receive government funding.
The proposal has not yet received approval from the Union Cabinet led by Prime Minister Narendra Modi. Sources said the charges could increase household gas expenses by around 2%, making it a politically sensitive decision amid already elevated fuel prices.
India has been seeking ways to strengthen its energy resilience as the country remains heavily dependent on imports for its oil and gas requirements. The disruptions caused by geopolitical conflicts have highlighted the need for larger emergency fuel reserves to protect against future supply shocks.
If approved, the proposed levy would represent a significant shift in India’s strategic energy planning by making consumers contribute towards building long-term fuel security infrastructure.
