India has taken a significant step in diversifying its energy basket with public sector refiners signing a one-year structured deal to import around 2.2 million tonnes per annum (MTPA) of liquefied petroleum gas (LPG) from the United States. This constitutes nearly 10% of India’s annual LPG imports, marking a historic development in India-US energy cooperation.
The move comes amid ongoing trade negotiations with the US and New Delhi’s efforts to balance its trade surplus with Washington following steep American tariffs.

1. India’s Energy Imports: Current Status

India is one of the world’s largest energy consumers:

• Crude oil import dependency: ~88%
• Natural gas import dependency: ~50%
• LPG import dependency: over 60% of total demand

West Asia—Saudi Arabia, UAE, Qatar, Kuwait—has traditionally supplied India’s bulk LPG imports.
The addition of the US as a long-term supplier reduces over-dependence on one region, enhances price stability, and strengthens India’s bargaining power.

2. Why the US Imposed Tariffs on India

The United States under President Donald Trump imposed 50% tariffs on select Indian goods in August 2025.
The rationale cited by the US includes:

• Correcting India’s trade surplus with the US
• Concerns over market access barriers in India
• Pressure to finalise a bilateral trade agreement
• Alignment with broader global protectionist strategies

These tariffs affected labour-intensive sectors such as engineering goods, textiles, leather, and gems & jewellery—making Indian exports uncompetitive compared to ASEAN nations and China.

3. Status of the India-US Trade Deal

• India has submitted its final proposal, and negotiations are in the advanced stages.
• New Delhi is exploring ways—such as increased energy imports—to address US concerns over trade imbalance.
• The US, too, views India as a long-term strategic economic and energy partner, especially in Asia.

This LPG agreement is seen as a confidence-building measure in the run-up to a broader trade pact.

4. Composition of LPG and Difference Between LPG & CNG

Main Components of LPG

• Propane (C₃H₈)
• Butane (C₄H₁₀)
• Small quantities of isobutane

Difference Between LPG and CNG

5. Impact of US Tariffs on India’s Export Sectors

Due to the 50% tariff:

• India’s exports to the US fell 9% year-on-year in October
• Significant decline in engineering goods, textiles, and other labour-intensive sectors
• India’s trade surplus with the US halved to $1.45 billion between April–October
• Exporters faced reduced competitiveness and lower profit margins

To mitigate this, the government launched:

• Export Promotion Mission – ₹25,060 crore
• Additional credit facilities – up to ₹20,000 crore
• Strong push for market

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6. Why the Deal Matters for India’s Energy Security

(i) Diversification of Supply

Reduces reliance on West Asian suppliers and insulates India from geopolitical shocks.

(ii) Better Pricing & Long-Term Stability

A structured deal provides predictable supply and potential price benefits.

(iii) Supports Domestic Welfare Schemes

As LPG penetration grows under schemes like Ujjwala, stable imports become critical.

(iv) Strengthens India-US Strategic Partnership

Energy is emerging as a cornerstone of the bilateral relationship.

(v) Trade Balance Correction

Higher US energy imports soften Washington’s concerns about trade imbalance.

7. Analysis: “The US will play an important role in India’s future energy security”

This statement is justified for several reasons:

1. Rising US Energy Exports

• The US has become a major exporter of crude, LNG, and LPG due to the shale revolution.
• It is now India’s 5th largest crude supplier and 2nd largest LNG supplier.

2. Strategic Convergence

Both nations share interests in reducing dependence on hostile or unstable regions.

3. Complementarity

• India: needs affordable, stable energy supplies
• US: seeks expanding markets for energy exports

4. Trade Negotiation Leverage

Energy cooperation could unlock progress in the larger India-US trade agreement.

5. Technological Cooperation

US companies offer advanced technology in refining, petrochemicals, and renewables.

8. Government Reforms & India’s Efforts Toward Energy Independence

Despite ambitious targets, India’s oil import dependence has risen because:

• Domestic output is stagnant
• Energy demand continues to grow rapidly

Government initiatives include:

• Hydrocarbon Exploration and Licensing Policy (HELP)
• Open Acreage Licensing Policy (OALP)
• Biofuel blending: Ethanol & biodiesel
• Electric mobility push
• Strategic Petroleum Reserves (SPR)

But these are insufficient to offset rising demand.

Conclusion

The structured LPG agreement between India and the US marks a historic milestone in New Delhi’s efforts to strengthen energy security, diversify import sources, and recalibrate its trade relationship with Washington. As global energy markets undergo rapid transition, India’s strategic engagement with the US in the hydrocarbon sector will play a crucial role in ensuring affordable, stable, and sustainable energy supplies for its 1.4 billion population.

The deal is not just about fuel—it is a strategic step toward economic resilience, trade balance correction, and deeper geopolitical alignment between the world’s largest democracy and its most powerful one.