Amid LPG shortage fears, what are Essential Commodities and Essential Services Maintenance Acts?

Amid growing concerns about LPG supplies in the country owing to disruptions in the Strait of Hormuz, the central government on Tuesday decided to invoke the Essential Services Maintenance Act (ESMA) in order to ensure priority allocation of the commodity to certain sectors. The move comes days after it exercised its powers, under the Essential Commodities Act, to direct refiners to ramp up LPG production and prioritise domestic supply amid Middle East supply risks. The action is aligned with its broader efforts to shield domestic consumers from the impact of the Israel-US-Iran war, which began late last month following the joint US-Israel attacks against Tehran that killed Iran's Supreme Leader.

The Centre has established a special panel to review LPG supply requests from restaurants and other industries after appeals from industry bodies.

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Let's learn about the Essential Commodities and Essential Services Maintenance laws in detail:

What are Essential Commodities Act and Essential Services Maintenance Act?

The ESMA enables authorities to make sure that certain essential services are free of disruptions in order to protect consumers. It gives the government power to ban strikes, to direct employees to return to work and take strict action for non-compliance. Under the law, gas supplies to priority sectors will be required to be mandatorily maintained at their full potential compared to the six-month average, subject to availability. Meanwhile, the allocation to fertiliser plants is capped at 20 per cent of their six-month average consumption.

The law also requires all stakeholders in the domestic natural gas ecosystem -- from producers to importers to transporters to distributors -- to share data on production, import, inventory, allocation, supply and demand data regularly with government authorities.

The ECA enables authorities to regulate production, supply, distribution and marketing of essential commodities in order to prevent hoarding, black marketing and artificial shortages that could disrupt public life. It gives the central government power to impose stock limits, fix prices, direct producers and traders to prioritise essential uses.

Under the law, upstream oil PSUs must supply LPG exclusively to oil marketing companies, like IOC, at controlled rates. It also empowers daily monitoring of inventories across the supply chain and equitable allocation during crises like the current Strait of Hormuz-linked disruptions.

How are disruptions in the Strait of Hormuz linked to India?

US President Donald Trump said this week that the war against Iran would continue until Tehran is “totally and decisively defeated”. However, Tehran is continuing to target energy hubs across the Gulf to disrupt regional economies and global energy markets, according to foreign media reports.

Analysts say the conflict could last several more weeks, depending on how long Iran can sustain its missile campaign.

India meets about two-thirds of its LPG demand and four-fifths of its crude oil demand through imports. It is the ​world's second-biggest importer of LPG. Cooking gas suppliers have hiked retail LPG prices for the first time in about a year.

What's causing LPG supply-related concerns in India?

Disruptions in the Strait of Hormuz have direct implications for energy supplies. More than four-fifth of India's energy supplies flow through this waterway, which also enables the passage of 20 per cent of the world's oil and gas supplies.

A 25-day inventory booking rule has been introduced for LPG consumers to prevent hoarding and black marketing.

Hospitality sector cautions against possible disruptions

Restaurants and hotels across the length and breadth of the country have been warned of likely disruptions or closures on account of LPG shortages, as higher energy prices and transport costs continue to batter supplies from major Gulf producers such as Qatar and Saudi Arabia.

Many hospitality players have already warned that they have limited LPG stocks, while others are conserving gas and installing induction stoves to manage the shortage.

Here are answers to a few frequently asked questions (FAQs) on the subject:

Why did the government invoke ESMA?

India has invoked the law to ensure priority LPG allocation amid supply disruption concerns.

What triggered LPG supply worries in India?

Disruptions in the Strait of Hormuz and the Middle East conflict triggered concerns about LPG shortages in India.

What does ESMA empower the government to do?

It allows the Centre to ban strikes and ensure uninterrupted essential services.

What powers does the Essential Commodities Act provide?

It helps the government regulate production, supply, prices and prevent hoarding.

Why is the Strait of Hormuz important for India?

A large share of India’s energy imports passes through it.

How dependent is India on LPG imports?

India imports about two-thirds of its LPG demand.

Why could the Middle East war affect LPG supplies?

Energy hubs and shipping routes face disruption risks.

What share of global oil flows through Hormuz?

About 20 per cent of global oil and gas supplies.