Government to allocate additional 200 SCM gas in latest push for domestic PNG
The government approved an incentive scheme granting City Gas Distribution (CGD) entities an additional 200 standard cubic metres (SCM) of lower-priced, domestically produced APM gas for every incremental billed domestic Piped Natural Gas (PNG) connection above a prescribed threshold in their authorized geographical area
The scheme takes effect from September 1, 2026, and is aimed at incentivizing CGD companies to activate unbilled connections and extend PNG networks into new areas
The stated objective is to help CGDs offset elevated LNG-sourcing costs, which have remained high due to episodic supply disruptions from West Asia
The additional domestic gas allocation is expected to substitute costlier imported LNG currently used for CNG and PNG supply, cutting the capital expenditure payback period for new domestic PNG connections from roughly 10 years to about 3 years
Administered Price Mechanism (APM) Gas and Its Pricing Formula
APM gas refers to natural gas produced from India's older, nominated fields (mainly by ONGC and Oil India Limited) whose price is administered by the government rather than left to market forces, unlike gas from newer/difficult fields which enjoys pricing freedom. APM gas accounts for roughly two-thirds of India's domestic gas production and is the cheapest domestic gas available, historically allocated on a priority basis to the CNG/PNG (city gas) and fertilizer sectors. Since November 2014, its price was set by the "modified Rangarajan formula"; this was overhauled following the Kirit Parikh Committee (2022) report accepted by the government in 2023.
Key Details
- APM gas ≈ two-thirds of India's domestic natural gas output; produced mainly from ONGC/OIL's nominated (legacy) fields
- Kirit Parikh Committee (submitted November 30, 2022) recommended: APM price linked to 10% of the monthly average Indian crude basket price, with a floor (~US$4/mmBtu) and ceiling (initially ~US$6.5/mmBtu, rising ~US$0.5/mmBtu annually)
- Committee also recommended full deregulation (removal of floor/ceiling) of APM gas pricing from January 2027
- CNG (transport) and domestic PNG (cooking) sectors receive priority allocation of APM gas ahead of other consumers, under the government's gas utilization/allocation policy
The additional 200 SCM allocation is precisely this priority-sector mechanism in action — routing cheaper, price-capped APM gas to CGDs to displace costlier imported LNG, reducing the effective cost of expanding household PNG coverage.
City Gas Distribution (CGD) Network and PNGRB
City Gas Distribution refers to the supply of natural gas (as CNG for vehicles and PNG for households/industry) through a dedicated pipeline network within a defined "Geographical Area" (GA). The Petroleum and Natural Gas Regulatory Board (PNGRB), the statutory regulator under the PNGRB Act, 2006, authorizes entities to develop CGD networks through competitive bidding rounds for each GA, and also determines network tariffs and connection charges.
Key Details
- PNGRB — established under the Petroleum and Natural Gas Regulatory Board Act, 2006; regulates downstream gas and petroleum product pipelines/distribution
- CGD bidding rounds have been conducted periodically since the first round in 2008; over 10 rounds have been completed, authorizing 200+ Geographical Areas across most states and union territories
- Authorized GAs together cover roughly half of India's geographical area and a large majority of its population under the National Gas Grid/City Gas Distribution expansion push
- The National PNG Drive is a supplementary government initiative to accelerate domestic PNG connection activation within already-authorized GAs
The new gas allocation incentive works within this PNGRB-authorized GA framework, targeting CGDs to convert authorized-but-unbilled connections into active domestic PNG households, directly advancing the National PNG Drive's coverage targets.
India's Gas-Based Economy Target and Import Dependence
India has set a long-standing policy goal of raising the share of natural gas in its primary energy mix, alongside efforts to reduce net energy import dependence. Because domestic gas production has plateaued relative to demand, India imports a significant share of its gas requirement as Liquefied Natural Gas (LNG), making city gas distribution costs sensitive to volatile international LNG prices and geopolitical disruptions such as tensions in West Asia (a major LNG source region for India, including via Qatar).
Key Details
- Government's long-term goal: raising natural gas's share in India's primary energy mix (a target periodically reiterated in energy policy statements)
- India remains a substantial net importer of LNG to meet gas demand beyond domestic (APM + non-APM) production
- Priority sectors for domestic (cheaper) gas allocation: CNG (transport), PNG (domestic/household), and fertilizer manufacturing (urea production)
- West Asia supplies a significant share of India's LNG imports, making the region's stability directly relevant to India's energy security and city gas pricing
Diverting additional low-cost domestic APM gas to CGDs is a direct policy response to imported LNG price volatility from West Asia tensions, illustrating how domestic gas allocation policy functions as an energy security tool alongside its consumer-affordability goal.
- Additional gas incentive: 200 SCM of domestic APM gas per incremental billed domestic PNG connection above the prescribed threshold
- Scheme effective date: September 1, 2026
- Expected capex payback period for new PNG connections: reduced from about 10 years to about 3 years
- APM gas share of domestic production: roughly two-thirds
- Kirit Parikh Committee (2022): recommended APM price at ~10% of Indian crude basket average; floor ~US$4/mmBtu, ceiling initially ~US$6.5/mmBtu (+US$0.5/mmBtu/year); full deregulation proposed from January 2027
- PNGRB Act: 2006; over 10 CGD bidding rounds completed, 200+ Geographical Areas authorized nationally