On 4 July 2026 the Government of India withdrew the Natural Gas (Supply Regulation) Order it had issued in March, ending four months of emergency gas rationing. The gazette notification said the conflict in the Middle East that had disrupted LNG shipments through the Strait of Hormuz was now subject to a ceasefire and negotiations, and that sea traffic through the strait had been permitted to resume. The order had been issued after suppliers invoked force majeure and LNG cargoes dried up. According to The Hindu BusinessLine, the closure affected almost half of India's LNG consumption.
India came through the episode without the industrial collapse or household shortages some feared. That outcome reflects a rationing order that was well targeted and fertiliser stocks that had been built up in advance. But the crisis also exposed a concentration of supply risk that Indian policy had tolerated for years. Our view is that India should treat the 2026 closure as a structural lesson, diversifying LNG supply away from routes through Hormuz, building strategic gas storage, and accelerating the electrification of uses where gas is a substitute rather than a necessity.
How exposed India was
The BusinessLine report, citing a Gastech study, notes that India is the fourth-largest LNG importer in the world. Qatar supplied 41.4 per cent of its LNG imports. India imported 27 million tonnes of LNG in 2024-25, of which 11.2 million tonnes came almost entirely from Ras Laffan. The US Energy Information Administration has estimated that 83 per cent of LNG shipped through Hormuz in 2024 went to Asian markets, with China, India, Japan and South Korea taking 59 per cent.
Qatar's long-term contracts with Petronet LNG are the backbone of India's gas supply. They are competitively priced and reliable in normal times. But every cargo leaves Ras Laffan through the strait. When the strait closed, there was no alternative route.
How the rationing worked
The order used powers under the Essential Commodities Act to set priorities. Domestic piped natural gas for households and compressed natural gas for transport received 100 per cent of their requirements. On 10 March the Department of Fertilizers announced that fertiliser plants had been placed in Priority Sector 2, with at least 70 per cent of their average consumption over the previous six months. According to BusinessLine, the fertiliser allocation was raised in phases to 95 per cent by the end of the rationing period. Industrial users, commercial city gas customers and refineries absorbed most of the cuts.
That hierarchy was sensible. Household cooking gas and public transport are politically and socially essential. Fertiliser production is linked to food security and the kharif sowing season. Industrial users can switch fuels or curtail output with less immediate harm.
Fertiliser stocks were the hidden buffer
The government's 10 March statement revealed an important preparation. Fertiliser stocks stood at 180.12 lakh tonnes ahead of the kharif season, 36.6 per cent higher than a year earlier, with urea at 61.51 lakh tonnes, DAP at 25.17 lakh tonnes and NPK at 56.30 lakh tonnes. Ninety-eight lakh tonnes of urea had been imported by February 2026, with another 17 lakh tonnes in the pipeline.
Those stocks allowed the government to cut gas to fertiliser plants to 70 per cent without risking a shortage for farmers. They were, in effect, a strategic reserve of embodied gas. Without them, the rationing order would have had to choose between industry and agriculture in a much harsher way.
What the crisis revealed
Three structural weaknesses emerged.
First, route concentration. India diversified its LNG suppliers over the past decade, signing contracts with US, Australian and other sellers. But a large share of volume still depends on a single route. Supplier diversity is not the same as route diversity.
Second, the absence of strategic gas storage. India holds strategic crude oil reserves but has no significant underground gas storage. LNG terminals hold only days of supply in their tanks. When cargoes stop, rationing begins almost immediately.
Third, the role of gas in substitutable uses. City gas for commercial users, gas for some industrial heat and gas for power generation can all be replaced, at least partly, by electricity or other fuels. Every unit of gas demand that is electrified reduces exposure to future supply shocks.
The oil side of the same shock
Gas was not the only fuel affected. BusinessLine reports that from 29 June the government removed caps on the sale of petrol and diesel and cut prices of commercial LPG, aviation turbine fuel for domestic flights and 5 kg LPG cylinders. Those measures show that the crisis touched liquid fuels and cooking gas as well as natural gas, and that the state used both rationing and price controls to manage it. A full review of the episode should therefore cover India's entire hydrocarbon import chain, not only LNG. Strategic crude reserves helped on the oil side. Nothing comparable existed for gas, which is why gas users bore the sharpest adjustment.
Policy recommendations
India should pursue route diversity actively, favouring supply from the Atlantic basin, Australia and East Africa for new contracts, even at a modest premium. A portfolio in which no more than a third of LNG supply depends on a single chokepoint would be a reasonable target.
It should begin developing strategic gas storage, whether in depleted fields, salt caverns or through contracted floating storage. The capital cost is significant, but the cost of four months of rationing, in lost industrial output and emergency measures, is also significant.
It should continue to build fertiliser buffer stocks, which proved their value. And it should accelerate electrification of commercial and industrial heat where technically feasible, using the country's growing renewable capacity.
Our position
India managed the 2026 Hormuz closure well. A targeted rationing order protected households, transport and agriculture, and fertiliser stocks built in advance absorbed the shock to the most sensitive industrial user. The withdrawal of the order in July marks a return to normal supply.
But the crisis confirmed that India's gas security depends heavily on a single route. Diversifying supply routes, building strategic gas storage and electrifying substitutable gas uses should be treated as priorities. The ceasefire has reopened the strait. It has not changed the geography that made India vulnerable.