How India’s oil sector held steady through Hormuz crisis

This article is authored by Satish Kumar Vaduguri, director general, Federation of Indian Petroleum Industry (FIPI).

When the Strait of Hormuz effectively closed to commercial shipping on February 28, 2026 following US-Israeli strikes on Iran, India’s oil sector faced what appeared to be an existential supply shock. More than 100 days later, with the Strait still disrupted, the outcome stands clear: Not a single retail fuel outlet ran dry, not a single refinery failed to operate, and consumers saw no price escalation at the pump. This outcome resulted from over a decade of deliberate supply-chain diversification, strategic inventory management, and real-time coordination between government and industry anchored on operational discipline rather than luck.

India's state-run processors are avoiding the Iranian oil for now, because they’ve already secured crude supplies through at least the end of August. (Representational Photo/ REUTERS)

The scale of pre-crisis exposure was substantial. Approximately 45% of India’s crude oil imports and roughly 60% of our liquefied petroleum gas transited the Strait of Hormuz before the closure. For a nation consuming crude at over two million barrels per day, such concentration represented acute vulnerability. Yet the crisis revealed something we had been building quietly: The operational capacity to absorb and reroute massive flows within days. Within weeks of the closure, the share of crude sourced from non-Hormuz routes rose from 55% to 70%. This reflected a sourcing strategy that had expanded our supplier base from 27 countries in 2006-07 to 41 countries today. That diversity, US, Norway, Algeria, Canada, Russia, and our Gulf partners, meant we could dial up flows from North Sea fields, West African basins, and Atlantic markets almost simultaneously.

The LPG picture tells a parallel story. In 2014, India possessed 11 import terminals for liquefied petroleum gas; we now have 22. This doubling reflected a strategic conviction that household cooking gas, especially in rural India, was too critical to depend on a single port or a single shipping route. When the Hormuz closure came, those 22 terminals became the physical backbone of supply continuity. Each terminal represented not merely a landing point but a separate node: A western coast terminal accessed suppliers via one route; an eastern terminal via entirely different geographies. The redundancy worked. LPG supplies required active, moment-to-moment management, with refineries prioritising their yields and import coordination running around the clock. The system never ran short.

Government coordination activated with precision and speed. The LPG Control Order of 8 March directed refineries to maximise liquefied petroleum gas yields from their crude processing; domestic LPG production lifted from 35 TMT per day to 54 TMT per day, an operational transformation achieved under acute pressure. Some refineries that had never produced LPG came online. This was not phantom supply achieved through accounting; it was refinery teams working to reconfigure their units, traders securing feedstock, and operators managing unfamiliar production profiles. Simultaneously, the Natural Gas (Supply Regulation) Order of March 9 under the Essential Commodities Act established an allocation hierarchy: Domestic piped natural gas, CNG for transport, and LPG production held at 100% of historical usage; industrial consumers could access 80%; fertiliser plants received 70%; refinery fuel use was capped at 65% of historical levels. Refineries operating at two-thirds capacity incur efficiency losses and higher per-unit costs. Industry accepted this constraint because we understood the stakes and because the allocation orders made clear that the constraint was temporary, not structural.

Inventory became the critical edge. At the height of the crisis, India held approximately 60 days of crude oil plus liquefied natural gas in reserve, alongside 45 days of LPG in dedicated storage. These figures are not accidental stockpiles. They represent conscious investment in buffer capacity, including our strategic reserves under the Indian Strategic Petroleum Reserve Limited programme, and reflected the international coordination on the release of 400 million barrels by the International Energy Agency on March 11. Every downstream oil company faces this question in crisis: Will we run out before supply chains rebalance? India’s answer was no, because we had built the tank capacity and the crude diversity to outlast the disruption.

The vessel exemption mattered profoundly. On March 26, India joined a select group of just five nations with diplomatic standing to transit commercial vessels through the Strait despite the broader closure. By April 6, nine India-flagged vessels had passed through under the exemption, including the LPG carrier Green Asha. Each vessel that transited carried confidence, not just product. It proved that the supply chain was not merely theoretical but operationally real. Refineries could receive fresh crude, programme their operations with visibility, and plan intake schedules across weeks instead of days. That management of the flow, the coordination with security assets, and the operational discipline required to keep vessels moving were the conditions that made the no-dry-out outcome possible.

Oil marketing companies absorbed extraordinary losses during the peak phase. The government did not pass that shock to consumers. Instead, it absorbed it. Oil marketing companies are carrying losses towards ₹1 lakh crore this quarter, on top of ₹30,000 crore committed last year to hold cooking-gas prices steady. An excise duty cut of ₹10 per litre on petrol was announced in late March, coupled with export levies on diesel at ₹21.5 per litre and aviation turbine fuel at ₹29.5 per litre to prevent supplies draining abroad. Consumers paid the familiar price at the pump. The Ujjwala cylinder in Delhi remained fixed at ₹642 throughout, with the State absorbing roughly ₹700 per cylinder in subsidy; the import-linked cost would have exceeded ₹1,600. This is the arithmetic of deliberate crisis management: government takes the cost, industry absorbs the operational constraint, consumers get stability.

India’s fuel security strategy includes tools beyond crisis response. Ethanol blending at roughly 20% in petrol saves approximately 4.5 crore barrels of crude imports annually, a steady pressure valve on crude demand. Refinery flexibility itself represents design choice accumulated across years; Indian refineries are configurable rather than rigid, single-feed installations locked into one crude type, able to process crude from different origins, different qualities and different supply rhythms. That flexibility is a capability, not an accident. When the Hormuz crisis arrived, we were not trying to find new options; we were deploying options already built into the system.

What the Hormuz crisis demonstrated is that energy security is not won through a single lever or one-off intervention. It comes from patient, deliberate accumulation of options: supplier diversity, terminal capacity, storage depth, refinery flexibility, diplomatic relationships that generate operational freedom, government systems nimble enough to reallocate resources, and industry discipline willing to absorb constraints in service of a larger collective outcome. The real crisis management happened beforehand, in the terminal investments that rarely made headlines, the supplier contracts that appeared as footnotes in reports, the storage construction that seemed routine. The crisis merely revealed what we had built. The outcome was the result of preparation meeting this moment with operational rigour.

(The views expressed are personal)

This article is authored by Satish Kumar Vaduguri, director general, Federation of Indian Petroleum Industry (FIPI).