India considers levies on LPG and gas users to help fund $42 billion strategic fuel reserves

Under the plan, cooking and natural gas storage infrastructure would be financed through levies on ‌users ⁠that could raise about $1.5 billion annually, the two sources said

New Delhi, August 5, 2026: India may impose levies on cooking gas and natural gas consumers to finance a planned $42 billion strategic fuel reserve as disruptions caused by the Iran war expose vulnerabilities in the country's energy supply chain, according to two sources with direct knowledge of the matter.The proposal would expand India's strategic reserves beyond crude oil for the first time. The planned stockpiles are intended to cover about two months of crude oil and liquefied natural gas (LNG) demand and around six weeks of liquefied petroleum gas (LPG), or cooking gas, consumption, the sources said, Reuters reported.Proposed Consumer LeviesUnder the plan, storage infrastructure for cooking gas and natural gas would be financed through levies on consumers, potentially raising about $1.5 billion annually, the sources said.The Ministry of Petroleum and Natural Gas is considering a levy of Rs 1.29 per kg of LPG, which could generate about $460 million annually at current consumption levels. It would add about Rs 18 to the cost of a standard domestic cooking gas cylinder, the sources said.For natural gas, the ministry has proposed a levy of Rs 1.43 per standard cubic metre, which could raise about $1 billion annually at current consumption levels.It was not immediately clear how the levies would be collected. The proceeds would mainly finance natural gas and cooking gas storage infrastructure, while crude oil reserves and strategic fuel inventories would continue to be funded by the Government of India, the sources said.The sources requested anonymity because the proposal is under discussion across ministries and has not received final approval from Prime Minister Narendra Modi's Cabinet.The proposed levies would increase household gas bills by about 2 per cent, the sources said, making the measure politically sensitive for the government as millions of consumers already face elevated fuel prices.The proposed funding mechanism, including levies on cooking gas and natural gas consumption, has not previously been reported. The Ministry of Petroleum and Natural Gas and the Finance Ministry did not respond to Reuters' requests for comment on Tuesday.$42 Billion Reserve PlanThe strategic reserve programme, planned over 10 years, would require about $42 billion, the sources said. More than half of the amount would be used to build storage infrastructure, with the remainder going towards stocking the reserves.The government estimates that India will need an additional 28 million metric tonnes of crude oil storage capacity, nine million tonnes of LNG storage and four million tonnes of LPG storage over the next 10 years, according to the sources.The plan was developed after supply disruptions linked to the Middle East crisis pushed up import costs and highlighted India's dependence on overseas fuel supplies.India, the world's third-largest oil importer and consumer, imports nearly 90 per cent of its crude oil. This has left the country heavily exposed to turmoil caused by the US-Israeli war on Iran and subsequent disruptions in the Strait of Hormuz, a crucial route for oil and gas shipments from Gulf producers to global markets.Emergency Reserves Lag PeersNew Delhi currently has 5.33 million tonnes of government-owned strategic crude oil storage capacity, while another 6.5 million tonnes is under construction. India, however, does not have dedicated strategic reserves for LPG and LNG.Also Watch: Cabinet Approves ₹84,084 Crore 'Samudra Manthan' Scheme To Boost Offshore Oil & Gas Exploration, Strengthening India's Energy Security | VideoThe country's emergency fuel buffers remain significantly smaller than those of major Asian peers. Government-controlled reserves currently cover less than 10 days of demand, compared with more than 100 days in Japan and South Korea.To get details on exclusive and budget-friendly property deals in Mumbai & surrounding regions, do visit: https://budgetproperties.in/

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 GasThe 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.Commercial LPG Becomes ₹194 Cheaper In Madhya Pradesh; Hotels & Caterers Relieved 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 ApprovalThe 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.