India strikes LPG deal with US under pressure from Trump

India has signed its first major liquefied petroleum gas (LPG) import contract with the US, a one-year deal covering about one-tenth of its LPG needs in 2026, at a time when Washington is pressing New Delhi on trade and energy issues.

State-run IndianOil, Bharat Petroleum and Hindustan Petroleum will import about 2.2 million tons of LPG from the US Gulf Coast under a structured contract benchmarked to Mont Belvieu prices, according to the petroleum ministry and company officials.

Oil minister Hardeep Singh Puri described the agreement as a “historic first,” noting that India had previously bought US LPG only on a spot basis.

The timing of the deal is significant. The Trump administration has imposed steep tariffs on Indian exports, including a 25% base duty and a further 25% penalty linked to India’s continued imports of Russian crude and other energy.

The combined burden has pushed duties on some Indian goods close to 50%, injecting new strain into bilateral ties and prompting New Delhi to look for signals that could help stabilize the relationship.

For Washington, the agreement opens access to one of the world’s fastest-growing LPG markets. Puri said it gives US suppliers entry into “one of the largest and fastest growing LPG markets globally,” while helping India diversify its sources of fuel at a time of heightened geopolitical risk.

India imported around 31 million tons of LPG last year, with roughly 65% of demand met through imports, almost all of them from the Middle East.

The new US contract represents a hedge but will not dramatically change the import mix. Middle Eastern suppliers still offer advantages on freight and pricing. Some analysts said the deal makes most sense as a strategic signal and a risk buffer rather than a cost-saving shift.

It also fits into India’s domestic political and fiscal calculus. As millions of low-income households moved to LPG under the Ujjwala scheme, demand surged, raising pressure on subsidy budgets.

Even as global LPG prices rose more than 60% last year, Ujjwala beneficiaries continued to pay about ₹500–550 per cylinder, while the underlying market price crossed ₹1,100. The government covered the difference, taking on more than ₹40,000 crore in subsidies.

To contain the financial strain, public-sector oil companies received compensation packages running into tens of thousands of crores.

Securing an additional stable supply line from the US, officials said, helps reduce exposure to sudden price swings or supply disruptions that could widen these subsidy gaps.

The new contract follows months of negotiations. Senior executives from IndianOil, BPCL and HPCL travelled to the US in July to meet producers and traders and discuss pricing formulas tied to Mont Belvieu, the benchmark for US propane and butane.

Deliveries will run through 2026 from the US Gulf Coast, with the option of extension depending on market conditions and political climate.

Energy analysts said the contract may give New Delhi more leverage when negotiating with Gulf suppliers and could become a template for future US energy purchases.

Still, they caution that the agreement alone is unlikely to defuse tensions with Washington. US officials have welcomed the deal but continue to call for more substantial shifts in India’s tariff regime and a sharper cut in Russian oil purchases.