Centre prioritises propane, butane for domestic LPG supply; petrochemical use curbed

In a significant move aimed at safeguarding household cooking fuel supplies, the Central government has directed all oil refining companies operating in the country to prioritise propane and butane streams for the production of Liquefied Petroleum Gas (LPG), restricting their diversion for petrochemical and industrial uses.

The directive, a copy of which was available for The Tribune, was issued through an order dated March 5, 2026, under Section 3 of the Essential Commodities Act, 1955 and the Petroleum Products (Maintenance of Production, Storage and Supply) Order, 1999. The government said the step has been taken in the larger public interest to ensure uninterrupted availability of LPG, which is a critical domestic cooking fuel used by millions of households across India.

Under the order, all oil refining companies have been instructed to maximise the utilisation of propane and butane streams produced, recovered, fractionated or otherwise available with them exclusively for LPG production. The government has also directed that LPG produced from these streams must be supplied only to the three public sector Oil Marketing Companies (OMCs) Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL).

Officials said the decision aims to maintain adequate supplies of domestic LPG, particularly at a time when the demand for cooking gas continues to remain high. The government estimates indicate that more than 99 per cent of the domestic LPG consumed in India is supplied and marketed through these three public sector companies.

The order places strict restrictions on the diversion of propane and butane streams for other industrial applications. Refineries have been specifically barred from diverting, processing, cracking, converting or otherwise utilising these streams for the manufacture of petrochemical products or downstream derivatives.

Propane and butane are widely used in several industries. Apart from forming the key components of LPG, butane in particular is extensively used as a refinery and petrochemical feedstock. Normal butane and isobutane are commonly used in gasoline blending and in isomerisation units in refineries. Normal butane is also cracked to produce butadiene and other olefins, which serve as essential raw materials for synthetic rubber and plastic manufacturing.

In the industrial sector, butane also finds applications as a physical blowing agent in the foam industry, particularly in the production of polystyrene and polyurethane foams. These foams are widely used in insulation, packaging and construction materials.

Liquefied butane is also used as an aerosol propellant in products such as paints, lubricants, cleaning agents and several consumer sprays used in automotive and manufacturing sectors.

Another important use of butane is in the production of intermediates for the polymer and tyre industries.

Industry observers say that the latest directive could affect petrochemical output from certain refineries where propane and butane streams are commonly used as feedstock for downstream chemical products.

The order also mandates that the three public sector oil marketing companies must ensure that LPG procured under this directive is supplied solely to domestic households, preventing diversion to commercial or industrial segments.

Before issuing the directive, the Central government said that oil refining companies were given a reasonable opportunity to present their views and submissions. Their responses were examined by the authorities before the final order was issued.

The order has come into force with immediate effect and will remain operational until further directions are issued. Authorities have warned that any violation of the directive will attract strict action under the Essential Commodities Act and other applicable laws.