For India’s restaurants limping back to normalcy after the initial days of the West Asia war-induced cooking gas crisis, the 50% hike in commercial LPG prices came as yet another blow. For over two months, most restaurants had been absorbing rising LPG costs due to supply issues, but the latest salvo on May 1 has made price hikes imminent.

“I believe all the restaurants that are not fine-dining will have to pass on the costs, as a 50% price hike is very severe,” Anurag Katriar, founder of Indigo Hospitality, told The Core. “Everyone else, be it quick service restaurants (QSR), affordable and casual dining, has no option but to pass it on. It’s not just the price hike, but there is heavy uncertainty around the West Asia war, and we do not know whether it will improve or not. It’s prudent to pass on the costs.”

The price hike, however, is unlikely to be very steep, with most restaurants looking at a 10-15% hike. “We have that much elasticity from the consumers,” he added. His company operates a chain of restaurants, including Indigo Deli, Indigo Café, Neel, and Indigo Burger Project.

The latest hike amounts to Rs 993 per cylinder, bringing the post-hike price per 19-kilo cylinder to Rs 3,071 in Delhi. This comes after a Rs 195 hike in April and Rs 114 in March. In the last three months, commercial LPG prices went up by around Rs 1,300 per cylinder.

Rising commercial LPG prices and supply volatility could force Indian restaurants to implement menu hikes of 10-15% to protect thinning profit margins.

To survive, many establishments are pivoting toward infrastructure changes like induction cooking, biofuels, and piped natural gas (PNG) to reduce their heavy reliance on expensive cylinders.

From Pan To Fire

“The supply crisis began after the government temporarily halted LPG cylinder supplies for commercial use, giving preference to households. That itself has pushed up landed costs of LPG by 40-45% in the last few months,” Amit Goyal, CEO & founder of Amar Pure Gold, told The Core. And, the latest LPG price hike has come on top of it.

Goyal’s company manufactures frozen food as well as manages 55 outlets of Captain Sam’s Pizza. During the supply crisis, around 15-20% of Captain Sam’s Pizza outlets had shut down, and had just opened up. But the LPG crisis has hit them yet again.

“For restaurants, cloud kitchens, and smaller food businesses, LPG isn’t just another input cost; it’s central to day-to-day operations. A spike of this scale puts direct pressure on already tight margins. Most operators will first try to absorb some of the impact by tightening processes or improving efficiencies, but if prices remain elevated, some level of menu correction becomes unavoidable,” said Goyal.

Sudhakar Shetty, who runs an individual restaurant, Visawa, in Mumbai’s Turbhe area, has just restarted a full menu. Until now, he has been taking a 10-15% hit on profits due to rising costs, as well as cancelling gas-consuming items like dosas and rotis.

“Our customers had started to complain, so we started them and held off price hikes as people were not in a situation to absorb hikes. But now with this huge rise in LPG costs, we will take a decision on price hikes in consultation with restaurant associations and more,” said Shetty.

Most restaurants are not just worried about gas costs; the energy crisis has caused the whole cost ecosystem to surge.

“It’s also important to look at this beyond just LPG. Fuel, logistics, and input costs are all interconnected. Pressure in one area tends to spill over into others, and over time, that can reflect in consumer pricing,” said Goyal.

Shetty, too, believes that transportation costs have also surged. “More importantly, the cost of plastic containers has gone up by 30-35%,” he said.

Here Come The Alternates

The price hikes are also likely to impact customer experience and service consistency, which has already been going downhill in the last few months.

According to Sagar Daryani, president of the National Restaurant Association of India (NRAI), a PHDCCI report on the sector pointed out that nearly 10% of restaurants temporarily shut down during the supply crisis, while 60–70% of establishments shifted to induction cooking, alternate fuels, reduced menus or shorter operating hours.

Goyal has had greater success at reducing LPG dependence on his manufacturing side of the business. He has been using diesel burners, boilers and more. While the alternatives are not exactly costlier, they require a rethinking of the infrastructure, which isn't built for them. Yet, he has gone ahead and made the change.

“We have reduced dependence on LPG from 55-60% to 35-40% and intend to bring it down to around 25% in the coming months,” Goyal said. Most restaurants have purchased induction plates and boilers, etc., but say that not all cooking can be done on a hot plate.

“There is some cooking that only LPG can do. For example, most people have moved slow cooking, soup and sauce making to induction. But most of the menu items need a fire-based cooking,” said Katriar.

For very small players who run homebound food centres, the price hit has taken various forms. Kashish Kataria, a homebound catering business owner in Vashi, has shifted to a tougher alternative of a coal-fired stove or a chulha.

“I have been making bhakris (millet breads) as well as curries on a chulha, and use LPG cylinders sparingly, only to make chapati (wheat bread). But the price of wood-fired coal has also doubled in the last few months,” she says. Yet, she is wary of hiking prices, as she is worried about losing customers.

Jubilant Foodworks, which operates Domino's and Popeyes, has 75-80% dependence on LPG. “A 50% LPG price hike implies Rs 135 crore incremental cost, leading to around 8% negative impact on absolute EBITDA and around 150-basis point margin compression,” calculated Karan Taurani, analyst at Elara Capital, in a note.

In the last few months, most small as well as medium-sized restaurants have been innovating on their end to deal with the crisis.

The Other Gases

Vishal Khalde, founder & CEO of Blue Planet Biofuels, which sets up and operates waste-to-gas plants, said that he has seen a surge in inquiries on the use of methane by restaurants as well. While restaurants until now have been seen as feedstock providers for him, they could also become customers as well.

“Earlier, they would view waste with no importance. Now they see it as a partial replacement for gas. There is little difference in the calorific value between methane (produced from waste, also used in LNG) and LPG, which is mostly either propane or butane. It can be easily used for cooking as well,” said Khalde.

The panacea that most restaurants now await is a shift to PNG or piped natural gas. While they would be charged commercial rates, PNG might provide 10-15% savings as it doesn’t involve logistics or storage costs. But more importantly, it provides the security of supply.

A PNG connection itself is not costly as it includes registration fees and deposits, etc., amounting to around Rs 7,000 per connection. But a connection depends on the available pipeline infrastructure in the area.

In India, Gujarat and Maharashtra have the most prolific pipeline infrastructure, with over 13 lakh and 8 lakh connections, respectively.

The government, too, has been pushing for PNG connections and offering all states and Union Territories an additional 10% allocation of commercial LPG, provided they support a long-term transition from LPG to PNG. India has over 1.6 crore domestic PNG connections with 48,568 commercial and 21,512 industrial connections across India.

The government, which began a PNG expansion drive in January this year, is also directing gas companies to expedite connections across 110 areas, including Maharashtra and Uttar Pradesh.

“We live in an industrial area, so the connection pipeline has been laid, and it would take around 2-3 months for the same to come,” said Goyal. Shetty, too, has applied for PNG and hopes the pipeline work is done in time for him to receive the benefits.

Since there are no other consumers of piped gas in the area, he might have to pay more for the pipeline.

The restaurant industry now stands at a crossroads of lower consumer footfalls, rising backend costs and the necessity to innovate even if it means reaching deeper into their pockets. The latter is non-negotiable, as it’s a matter of survival for the Rs 5.69 lakh crore industry.