Government Revises Gas Allocation Priority as LNG Imports Hit by Hormuz Disruption
US-Israeli strikes on Iran and Tehran's retaliatory actions disrupted LNG shipments through the Strait of Hormuz, hitting India's gas imports (over 50% of India's LNG transits this strait, primarily from Qatar)
In response, the Central Government issued a Natural Gas Control Order on March 9, 2026, under the Essential Commodities Act, revising the gas allocation priority framework
Top priority: Household piped natural gas (PNG), CNG for transport, and LPG production — to receive 100% of their previous 6-month average consumption
Second priority: Fertiliser plants — guaranteed at least 70% of their prior 6-month average
Third priority: Industrial consumers (including tea industry, factories) — 80% of prior average
GAIL bought an Oman LNG cargo on spot markets to partially offset the supply shortfall
The Essential Commodities Act, 1955: Powers and Mechanism
The Essential Commodities Act (ECA), 1955 is a central legislation that empowers the Union Government to regulate the production, supply, and distribution of commodities classified as "essential" to prevent hoarding, speculation, and shortages. The Act derives its authority from Entry 33 of List III (Concurrent List), Schedule VII of the Constitution, allowing both Centre and States to legislate.
The Natural Gas Control Order is an ECA instrument — the government using its allocation powers to ration constrained LNG supply in a priority sequence that protects household welfare (piped gas, CNG, LPG) over industrial use.
Strait of Hormuz: India's Energy Chokepoint Vulnerability
The Strait of Hormuz (between Iran and Oman) is the world's most critical energy chokepoint, handling approximately 20–21 million barrels per day of crude oil and a third of globally traded LNG. India's import dependence makes it particularly vulnerable: about 60% of crude oil imports and over 50% of LNG imports pass through this strait.
The Hormuz disruption is a real-time demonstration of India's structural energy security vulnerability. The government's priority allocation order is a crisis management tool, not a structural solution.
Natural Gas Allocation in India: Regulatory Framework
Natural gas allocation in India operates through a tiered administrative mechanism. The Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 regulates downstream pipelines and city gas distribution (CGD) networks. The Ministry of Petroleum and Natural Gas (MoPNG) manages upstream allocation and issues policy directions under ECA during supply crunches.
Key Details
- Domestic gas (from ONGC, OIL fields) is priced by the government under the Domestic Natural Gas Pricing Guidelines; administered prices are lower than market LNG
- Priority sectors for administered-price domestic gas: urea plants, LPG production, PNG households, and CNG — the same sectors that got top priority in the 2026 Control Order
- LNG (imported) is priced at international rates; industrial users typically buy LNG at market prices while households are shielded by administered domestic gas prices
- City Gas Distribution (CGD) entities (like MGL, IGL, Adani Gas) distribute compressed natural gas (CNG) for vehicles and piped gas (PNG) to homes under PNGRB licence
The 2026 Control Order essentially extends the domestic gas allocation priority logic to the scarce LNG supply pool — a temporary but significant market intervention that overrides normal commercial contracting to protect essential end-uses.
- India's LNG imports: >50% transit Strait of Hormuz; Qatar is largest supplier (~8.5 MMTPA under long-term contracts)
- Strait of Hormuz: ~20–21 million barrels/day crude oil; ~30% of globally traded LNG
- Natural Gas Control Order: March 9, 2026, issued under Essential Commodities Act, 1955
- Priority 1 (100% of 6-month avg): Household PNG, CNG for transport, LPG production
- Priority 2 (min 70%): Fertiliser plants
- Priority 3 (80%): Industrial consumers
- India's LNG import terminal capacity: ~47–50 MMTPA (Dahej, Hazira, Kochi, Ennore, Dhamra, Mundra)
- India imports ~60% of LPG consumption; ~90% of that via Hormuz
- ECA, 1955 — Entry 33, Concurrent List; amended 2020 to deregulate select foodgrains