(Commonwealth_India) India has announced a major overhaul of its domestic gas allocation policy aimed at improving the availability and affordability of natural gas, particularly for the city gas distribution (CGD) sector that serves millions of consumers across the country. This new policy framework is expected to enhance supply visibility and enable better planning for the use of compressed natural gas (CNG) in transportation and piped natural gas (PNG) in residential areas.
Effective from the first quarter of fiscal year 2026, allocations for CNG and PNG will now be made on a two-quarter advance basis. This change is expected to significantly streamline the operations of CGD entities by giving them greater certainty about upcoming gas supplies, allowing for more efficient scheduling and resource management. The new system incorporates supply forecasts provided by state-run energy firms such as GAIL (India) Limited and the Oil and Natural Gas Corporation (ONGC), which will now play a central role in ensuring accurate demand-supply coordination.
In addition to this, the revamped policy includes provisions for the inclusion of new well gas (NWG) from ONGC and Oil India’s nomination fields. Previously, the allocation of NWG was handled through an auction-based mechanism, which often led to supply delays and market uncertainties. Under the new policy, NWG will now be allocated through a quarterly pro-rata distribution model. This change ensures that gas will be distributed to CGD companies in a timely and equitable manner based on their assessed needs, by guidelines issued by the Ministry of Petroleum and Natural Gas (MoPNG).
GAIL will be responsible for distributing NWG to CGD entities, ensuring that each company receives a fair share of the available resources. This change is expected to improve the predictability of supply and reduce operational disruptions, which have been a recurring issue for several CGD operators.
Both the administered pricing mechanism (APM) gas and the newly included NWG will continue to be priced based on the Indian crude oil basket, with prices updated on a monthly basis. This pricing approach links domestic gas costs to global energy trends while still maintaining government oversight. Recent declines in crude oil prices are expected to impact end consumers positively by lowering the costs of CNG and PNG, which are critical fuels for transportation and household use in urban and semi-urban areas.
Over recent years, the availability of APM gas has declined due to reduced output from India’s aging domestic gas wells. This shortage has negatively affected major CGD players such as Mahanagar Gas, Indraprastha Gas, and Gujarat Gas, which have faced narrowing profit margins as they were forced to rely more on expensive imported gas to meet demand. The government recently reduced the APM gas allocation to CGD companies by 18% to 20%, effective April 16, further increasing the pressure on these companies.
The new gas allocation framework is designed to reverse this trend by ensuring a more consistent and affordable supply of domestic gas. It underscores the government’s commitment to creating a stable and transparent distribution system that supports essential services and fuels economic growth.
In parallel with these domestic reforms, India is also working on broader energy trade strategies. The government is exploring the possibility of removing import taxes on US ethane and liquefied petroleum gas (LPG) as part of ongoing trade negotiations with the United States. This initiative aligns with India’s strategic interest in expanding its liquefied natural gas (LNG) imports from the US, which could further diversify its energy supply sources and reduce dependency on volatile global markets.
Additionally, the government is intensifying its efforts in the exploration and production (E&P) sector. In the latest Open Acreage Licensing Policy (OALP) Bid Round-IX, 28 exploration blocks have been given out, covering a large area of 136,596 square kilometers across eight sedimentary basins. Notably, 38% of this newly awarded acreage lies in regions that were previously considered inaccessible, signaling a major push to tap into untapped domestic energy reserves.
Together, these measures reflect a comprehensive approach to strengthening India’s energy security while making natural gas more affordable and accessible to the public. The reforms are expected to bring long-term benefits to urban and semi-urban households, as well as to the transport sector, supporting cleaner energy use and contributing to environmental sustainability.
