LPG Shortage Hits Restaurant Operations, Retail Rentals Risk

The ongoing LPG crisis in India is affecting kitchen capacity and operations for restaurants and hotels, with many reporting production and delivery disruptions.

If shortages persist, establishments may face reduced revenues, menu cuts, temporary closures, or relocations, potentially prompting rent deferments or renegotiations with landlords, particularly in prime retail corridors. Restaurant and hotel associations indicate the current situation is manageable, but persistent shortages could lead to wider operational and financial stress.  In Bengaluru, the Hotels Association highlighted that sudden gas stoppages have already disrupted hotel operations despite prior assurances of uninterrupted LPG supply.

Key Highlights

• LPG shortages are disrupting kitchens, production, and deliveries across India’s F&B sector
• Restaurants may face revenue drops, menu cuts, and potential lease renegotiations
• Retail rentals in prime cities like Mumbai, Bengaluru, and Delhi remain stable for now but could be pressured

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Similarly, Delhi restaurants are shifting to alternatives such as piped natural gas and induction cooking. Many are modifying menus and cooking larger batches using induction appliances to mitigate the shortage. Prolonged disruptions could also impact staff wages, especially in the unorganised sector.

Retail rents remain largely stable for now in Bengaluru, Hyderabad, Mumbai, and Delhi, but experts warn sustained shortages may lead tenants to seek temporary relief or renegotiations, though outright rent waivers are unlikely as LPG disruption does not qualify as a force majeure event. Prime retail rentals vary widely: Bengaluru averages ₹500 per sq ft, Mumbai up to ₹1,000, Delhi’s Khan Market reaches ₹1,500, Cyber Hub Gurugram ranges ₹500–600, and Connaught Place ₹750–900 per sq ft.

“Running a restaurant is a complex business model with multiple layers, including cash flow, workers’ salaries, electricity bills, taxes and loan repayments. Business is coming in right now, though supply disruptions are being reported, leading some restaurants to optimise operations. But if LPG supply issues persist for weeks or months, it could lead to losses not just for hotel and restaurant owners, but also for the government," said Niranjan Shetty, chairman (legal), of Mumbai's Indian Hotel and Restaurant Association (AHAR).

"For now, only a few days have passed, so we hope the situation will improve. Only if the issue persists over the next few days or months could it affect real estate transactions involving restaurants and hotels operating under a lease. Even otherwise, the entire economy may suffer due to this,” Shetty said.

“Owners, employees and customers will all be impacted if the disruption continues. Restaurants and hotels operate on thin margins, and even a short interruption in essential supplies like cooking gas can affect daily operations. At the same time, businesses still have to manage fixed expenses such as rent, electricity charges, GST payments and staff salaries, regardless of whether they are fully operational. If the situation persists for long, it will create financial pressure on many establishments,” PC Rao, president of Bengaluru Hotel Association, told Hindustan Times Real Estate.

“At the moment, many businesses are still managing, but if the situation continues for a prolonged period, the pressure will increase. I do not immediately see a change in commercial rentals in such a scenario, but the crisis will certainly affect business activity. If restaurants and other establishments are forced to temporarily shut down, it creates employment challenges. The moment sales decline and the situation drags on, some shops may even have to close down temporarily,” G Ram Reddy, president-elect of the Confederation of Real Estate Developers' Associations of India (CREDAI), told Hindustan Times Real Estate.

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While the crisis mirrors COVID-era disruptions in affecting operations, it is currently expected to be short-term. Restaurants may eventually consider relocation, downsizing, or lease renegotiations if LPG supply remains constrained. Margin pressures and declining profitability could also impact revenue-sharing arrangements with landlords in high-rent retail districts.