LPG Shortage Threatens to Disrupt Operations of 95% of Restaurants and QSR Chains

India's Restaurant Industry Faces Uncertainty Amid LPG Shortage

Key Figures:

• 95%: Percentage of restaurants in India that rely on LPG as their primary cooking fuel
• 5,00,000: Number of restaurants represented by the National Restaurant Association of India (NRAI)
• Rs 5.7 lakh crore: Annual turnover of the restaurant industry in India
• 8 million: Number of Indians employed directly by the restaurant industry

Background: The ongoing conflict in West Asia has triggered a severe LPG shortage in India, with 85-90% of India's LPG imports passing through the Strait of Hormuz, a critical maritime chokepoint. This has led to a significant disruption in LPG supplies, affecting nearly 95% of restaurants across the country.

Impact on Restaurants: The National Restaurant Association of India (NRAI), which represents over 5,00,000 restaurants, is facing challenges due to the LPG shortage. Sagar Daryani, president of NRAI and co-founder and CEO of Wow! Momo, stated that costs have risen nearly 1.5 times, but the priority is continuity of operations. Restaurants are left with just two to three days of stock, and the NRAI is writing to the government and in discussion with oil marketing companies (OMCs) to seek clarity on the supply situation.

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Government Response: The government has invoked the Essential Commodities Act, 1955, under which restaurants are entitled to receive supplies as an essential service. However, this has created significant confusion on the ground, with LPG distributors asking commercial establishments to stop supplies. The government has also ordered gas marketing entities to maintain 80% of their past six-month average gas consumption subject to operational availability.

Industry Overview: The restaurant industry is the third largest in the service segment, with an annual turnover of Rs 5.7 lakh crore and providing direct employment to over 8 million Indians. The industry is represented by prominent quick service restaurant (QSR) brands and franchise operators, including Domino's Pizza, McDonald's, KFC, Pizza Hut, Burger King, Subway, and Wow! Momo.