Weeks Into the West Asia Crisis, How Is India Really Doing?

Prologue: This is CarbonCopy’s third bulletin on how India’s energy crisis is playing out. Here is Week One. Here is  Week Three. And now, today, Week Six.

One morning last week, in the urban village of Madanpur Khadar, Kajal ran out of LPG.

Hers is one of the more impoverished parts of Delhi. Wedged between Uttar Pradesh and Haryana and abutting the Yamuna River, Madanpur Khadar is one of Delhi’s waste hubs. It processes thousands of tonnes of rubbish daily and predominantly counts migrants who work as cleaners, sweepers, office helpers and labourers as its residents.

That morning, with no refill in sight, the 35-year-old turned to a familiar (and large-hearted) fallback. “I’ll go to my friend’s house to cook,” she said, sitting among a group of women who have all, in recent days, found themselves navigating the same uncertainty. Across the village, empty cylinders have become a shared condition. 

As supply disruptions due to the escalating war in West Asia ripple through global energy markets, the impact is now palpable in low-income neighbourhoods across India, where cooking fuel is claiming an ever-larger share of many workers’ daily wages.

Most residents of Madanpur Khadar have turned to black markets to procure gas, which is filling the gap left by formal LPG distribution chains. 

Enterprising locals are selling small quantities of gas at above-market rates to households across the city. “We ran out of gas about 10 days ago,” said Anju Devi, a daily wage labourer. “Since then, my husband has been getting 1kg of gas daily from the neighbourhood where they are selling it for ₹300 a kg.” 

Given a 14 kilo LPG cylinder lasts, on average, about a month in India, one kilo will last about two days. The resulting economics is unsustainable for most low-income settlements. “We earn about ₹400-450 a day,” Anju Devi told CarbonCopy. “Most of it now goes into buying gas. We’ve also reduced our gas intake due to the shortage.”

These trends point us to one conclusion and one question. One, as the energy shortage gets worse on the ground, India’s informal economy has stepped in, providing both black-market gas and firewood. As this report will show, its solutions are enterprising and customised to local purchasing power. 

Its response, however, is also jury-rigged and can come with larger costs. As illegal LPG refilling centres use pipes and regulators to move gas from full cylinders to empty ones, India is seeing accidents like this one at Daltonganj and this one in Surat.

And so, the question. People fall back on the informal economy when official mechanisms fail. And so, what does its entry tell us about how India’s government is handling the energy crisis?

Falling back on the informal economy 

As the conflict in West Asia passed its 45th day, similar tales like the ones we heard in Madanpur Khadar are coming in from across India.

Unable to afford LPG, some workers are leaving Delhi’s urban villages and informal settlements for home. Yet others, needing work or unsure they will find LPG back in their villages are staying on, falling back on either the black market or firewood gathered from nearby parks and forests.

In a small settlement near Gole Market, Sunita Chauhan, who has lived in a makeshift home since 1984, said her family has returned to chulhas. “The price of firewood has also gone as high as Rs 120 per kilo,” she said. “We’ve started cutting logs from the nearby forests in the city.” Vakila Devi, who lives in the same colony as Chauhan, added the gas shortage has compounded existing vulnerabilities. “We’re already struggling with delayed pensions and no permanent housing.” Her family had initially depended on nearby restaurants, but when they shut down, they had no choice but chulhas. 

In Kalka-Garhi, another urban village settlement in Delhi, Rahul, 24, said his family recently spent ₹4,500 on a cylinder, three times as much as the official price, and have also stockpiled firewood worth ₹80-90 per kg for emergencies. “Few of us in the area have also collected wooden logs from nearby parks,” he said. 

Around 10-15 shops in the Kalka-Garhi have closed in recent weeks, many staffed by migrant workers who returned to their hometowns. Saif Sheikh, who runs a tailoring shop, said labour shortage has affected his business. “Most of the people working here have gone back home because they couldn’t get gas cylinders and even eating at dhabas was getting expensive for them.”

For some families, however, returning home is not an option. As Kajal had told CarbonCopy, “What will we do going back home? Even there we depend on LPG for food.” 

She is right. The energy shortage has also reached rural India. Take Dulki. A village on an island called Gosaba within the Sundarban delta, it has not seen regular LPG supplies since mid-February. 

Unlike much of rural India, almost every household in this village was using gas for cooking but now, with LPG unavailable at the regulated price, they have shifted to firewood. “As of now, forests are not being cut,” said Raju, a resident of Dulki. “Villagers are collecting firewood, fallen leaves and twigs for emergency purposes.” It wasn’t a hard transition. Most households were still using their traditional firewood stoves. “If cooking quantity is more, cooking duration is longer, or we are boiling feed for cattle, using gas can be inefficient,” he had told CarbonCopy.

Elsewhere in India, though, forests are being logged. Take Amchakala, a village with about 60-70 homes near Madhya Pradesh’s famous Bhimbetka rock caves. Here, after using subsidised LPG cylinders provided by the central government’s Ujjwala scheme for five years, its households have gone back to chulhas. Every morning, its villagers now head into Ratapani Tiger Reserve with axes and ropes to illegally harvest firewood.

Media reports suggest that, across India, the price of alternate fuels is rising. In Tamil Nadu, led by demand from households and eateries, the price of firewood rose to ₹8,000 per tonne (₹8/kilo) within 10 days of the conflict. 

Around the same time, firewood got costlier in Delhi, climbing from ₹20/kilo to ₹30-40/kilo. Coal, in the city, similarly rose from ₹40/kilo to ₹60/kilo. A month into the war, firewood prices had climbed from ₹6-7/kg to ₹8-10/kg in Karnataka. Today, 45 days into the hostilities, demand for firewood continues to rise in Kolkata. “We have seen around a 20-25% increase in demand for firewood in the past two weeks,” a firewood seller told CarbonCopy. He did not want to be identified.

Blackmarket rates for gas, as Anju Devi of Madanpur Khadar told CarbonCopy, are rising, too. In Delhi, 14 kg cylinders, which used to cost ₹1,000, are now selling for anywhere between ₹4,000 and ₹5,500. In Bangalore, their black-market price rose to ₹5,000. In Surat, refills of the 5 kg LPG cylinder began costing ₹500. In Delhi, black-marketers also began selling half-filled cylinders for ₹2,000. Yet others, as the people of Madanpur Khadar said, began selling LPG by kilo – using pipes and regulators to move gas from one cylinder to another. LPG price variations between cities became palpable as well.

This entry of the informal sector needs to be understood.

How is India managing the energy shock?

Over the past 45 days, India’s Union government has taken a series of steps to ameliorate the energy crisis. These include both supply-and demand-side interventions.

On supply, a diplomatic outreach is underway as India tries to buy more from Russia, Venezuela and countries in Africa. State-owned refineries have been told to boost LPG production.

On demand, households have been told to switch from LPG to PNG. The government has also withdrawn gas from some sectors while keeping supplies stable elsewhere. It halted commercial LPG supplies, for instance, and directed all LPG to domestic users. In tandem, India is seeing police raids and surveillance (Aadhaar-based verification for gas cylinders, etc) to crack down on hoarding and black-marketing.

That is just the start. The government has also hiked commercial LPG rates — up 10% to ₹2,078 — and is planning subsidised community kitchens, each with assured cooking gas supply, in key manufacturing hubs to stem the numbers of migrants heading home. It is also working on financial relief for Indian firms — including a ₹2.5 trillion credit guarantee scheme; rationalisation of tax and duty structures on energy inputs; extending delivery timelines for central and state PSU contracts; a price-stabilisation fund; and so on.

One looks at this flurry of responses and two patterns stand out. One. Some of these measures, like the rationalisation of duty structures, are weak amelioratives for what is, ultimately, a problem of physical scarcity. As of now, world oil supply has dropped from 106 million barrels/day in 2025 to 82.9 million barrels/day. And that, mind you, is just crude. India gets 80-85% of its imported LPG; about 55% of its crude; and 60% of its LNG from the Persian Gulf. Of these, the government is relatively better placed on crude, thanks to a more geographically dispersed supply chain. But even there, India has problems. “A barrel of oil from Venezuela is not the same as a barrel or oil from Russia or Saudi Arabia,” a former petroleum secretary told CarbonCopy. “This is not a simple case of ‘we lost 2o here, but replaced it with 20 from elsewhere.”

The shock in LNG, given India’s dependence on imported LNG (half of India’s LNG is imported, and 80-85% of that comes from Qatar), is even harder to absorb. To quote MB Ghalibaf, the Speaker of the Iranian Parliament, countries cannot “print gas molecules”. 

Complicating matters, as books like Plastic Inc show, since the global oil industry responded to talk of Peak Oil by getting the world hooked to plastic, the world is seeing shortages in industrial feedstocks as well. Within a month of hostilities, plastic and polymer production had dropped by 40%. And polypropylene prices, for instance, had risen from ₹110/kg to ₹180/kg. Similar shortages loom for helium, fertilisers, sulphuric acid and so on.

Two. Given state polls, price hikes have been a prominent absence within the government’s measures. “Prices are one way we match demand and supply,” said Avinash Kishore, a senior research fellow at IPFRI. “And in India, we have largely taken that option off the table.”

This reluctance to raise prices — barring hikes for commercial LPG and aviation fuel for international flights — comes with large costs. For one, the load is falling on India’s oil companies. “I am told they are making a loss of ₹20 per litre of petrol and diesel,” a retired petroleum secretary told CarbonCopy. In addition, as this article said above, the government has created a hierarchy of needs and is supplying LPG/LNG to some sectors, while starving others.

This decision resulted in the entry of the informal economy. One place to start is fertilisers.

Price for demand management

In his conversation with CarbonCopy, Kishore alluded to Urea.

“One argument against price hikes is that poorer farmers won’t be able to afford fertiliser,” he said. “In the case of urea, that concern is hardly relevant today.”

Indeed, as a clutch of media reports and academic papers say, over-subsidisation has resulted in Indian farmers overusing urea. While the recommended ratio of nitrogen, phosphorus, and potassium (NPK) fertilisers is 4:2:1, in 2022-23 the ratio of actual applications was 11.8:4.6:1. For this reason, price hikes are a way to get farmers to use urea more carefully.

As things stand, India might run into an urea shortage later in this kharif season. “Farmers use half their urea at the beginning of the kharif and the rest follows later,” Kishore had said. “In that sense, we have enough urea for the early to mid kharif.” The outcome, in effect, is one where price hikes might have resulted in more judicious use of urea. And, as the instance of Kajal from Madanpur Khadar shows, also resulted in more careful use of LPG. 

What India is seeing, however, is an outcome where some sectors are using petroleum and its products as before — with no sign of scarcity — while others scour for energy. Along the way, as fuels like LPG and LNG came to have two prices — the real price and the suppressed (official) price at which a few sectors get it — the informal economy saw its opportunity. For instance, as Raju of Gosaba said, any available stock of LPG cylinders on the island began getting sold in the black market or at inflated prices.

The government has thereafter responded with brute force — carrying out raids on illegal refilling centres, insisting on Aadhaar-based verification for LPG deliveries, threatening to revoke LPG connections from anyone who doesn’t switch to PNG, and so on.

Some of this will change after state polling — in Kerala, West Bengal, Tamil Nadu and Assam and Puducherry — ends, say experts.

Elsewhere in India

It’s hard to predict what happens next. 

Given the damage to oil infrastructure in the Gulf, it’s clear by now that oil supplies won’t get back to normal in a few weeks or months. It’s also clear that oil prices will rise further.

Here is why. The first Gulf War (1990) took 6% off global oil supply and oil prices jumped 93%. In 2002, too, at the time of the second Gulf War, supply fell by 2% but oil prices spiked 28%. This time around, with damage running deeper, there is already chatter that oil might touch $200/barrel. Given rising prices, India might end up buying less petroleum than before. At the same time, though, as India’s informal economy is already showing us, there are limits to what Indians can pay. If prices go too high, households will fall back on alternatives like firewood and coal.

Autos lining up at an LPG pump at 11 pm in Kolkata. Video: Shaswata Kundu Chaudhuri

For now, in these final days before the expected price hike, the country is awash in second- and third-order effects. In Kolkata, auto drivers are spending hours, sometimes the entire night, queuing at fuel stations. Small businesses in the city are also feeling the squeeze. With fewer restaurants operating, the demand for fish has dropped. “Eateries which used to take 6kg of fish daily now take only 1.5-2kg,” said an employee at Baba Lokenath Fish in Kolkata’s Gariahat market. With that, fish prices dropped, affecting fisher-folks in turn.

Polymers are directly linked to naphtha and other crude derivatives — and so industrial production is dropping as well. There are ecological worries as well. In the Sundarbans, Gosaba has seen concentrated mangrove reforestation programmes. Any recourse to deforestation will reverse years of work.

One has also seen flip-flops. The decision to halt commercial LPG supplies, for instance, choked the production of a key solvent (isopropyl alcohol) and forced top drugmakers to warn of disruptions to medicine supplies. In response, the government allowed supply of a “certain minimum” quantum of LPG to key pharma companies. 

In the coming days, more such choices will have to be made. “In sowing season, for instance, India will need to provide diesel (for pumps) and gas (for fertiliser),” said the former petroleum secretary. “At that time, we might need to starve other sectors.”

And in turn those that live off those sectors.