West Asia conflict squeezes India's gas supply, impacting growth

The escalating conflict in West Asia has created a significant gas crisis for India, leading to an estimated 8-10% dip in daily sales volumes for the City Gas Distribution (CGD) sector. This disruption has been primarily driven by the impact on Liquefied Natural Gas (LNG) imports, which constitute about 40% of India's total gas requirement. Qatar, a major supplier accounting for approximately 45% of India's LNG imports, has declared force majeure on international deliveries following a halt in production at its Ras Laffan Industrial City facility due to regional disruptions. This has created a domino effect across the Indian gas value chain, with several major gas traders also invoking force majeure due to their inability to secure scheduled cargoes. The most immediate impact is on industrial and commercial (I&C) users of Piped Natural Gas (PNG), who rely heavily on imported LNG. These users are facing curtailment of gas supply, with some reports indicating reductions of up to 35% for commercial users. Conversely, Compressed Natural Gas (CNG) for transportation and domestic PNG supplies for households remain relatively insulated. This is due to a government notification under the Essential Commodities Act, 1955, designating these as high-priority sectors for gas allocation. Petroleum Minister Hardeep Singh Puri has assured that domestic cooking gas (LPG) and CNG supplies are protected and that the government is actively securing alternative sources and routes for energy imports to ensure uninterrupted fuel availability for households. The crisis is also affecting various other sectors. Restaurants and the hospitality industry are experiencing a shortage of commercial LPG, leading to concerns about operational disruptions and potential closures. The National Restaurant Association of India (NRAI) estimates that a prolonged shortage could cost the economy between Rs 1,200 and Rs 1,300 crore per day. Other industries, including fertilizer manufacturing, tile production, and even food delivery services, are facing the brunt of these supply constraints. The fertilizer sector, in particular, is crucial for India's agriculture and faces challenges with reduced gas supply impacting production. Globally, the conflict has led to a surge in LNG prices, which have reportedly doubled. This has also impacted oil prices, with Brent crude briefly surging to $119.50 a barrel before easing. The disruption has also highlighted India's dependence on energy imports, with nearly 85% of its energy needs met through imports. A significant portion of India's oil and gas imports transit through the Strait of Hormuz, a critical chokepoint that has been effectively disrupted by the conflict. In response to the crisis, the Indian government has implemented measures such as the Natural Gas (Supply Regulation) Order, 2026, to prioritize essential supplies. They are also looking at diversifying import sources and routes to mitigate risks. The ability of CGD players to pass on increased costs to end consumers is expected to cushion their profitability and liquidity. Analysts are also closely watching the stock market performance of gas and power companies, with some recommending stocks like BHEL, Suzlon, Adani Power, and Tata Power amidst the volatility. However, the overall impact on India's growth journey remains a concern, with potential hits to GDP growth if crude oil prices remain elevated.

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