NEW DELHI: The ministry of petroleum and natural gas on Friday announced key changes to the domestic gas allocation policy, aimed at ensuring sustained availability and affordability of natural gas for the Compressed Natural Gas (CNG) used in transport and Piped Natural Gas (PNG) used in domestic households.
Under the new policy guidelines, beginning Q1FY26, allocations of domestic natural gas for the CNG and PNG segments will be made on a two-quarter advance basis. The allocations will now also include New Well Gas (NWG) from the nomination fields of state-owned producers ONGC and Oil India (OIL).
“Estimations by GAIL and ONGC will help ensure supply visibility to CGD entities in advance, enhancing planning and delivery efficiency,” the government said.
The policy revision comes in the wake of recent changes that saw a reduction in the allocation of Administered Price Mechanism (APM) gas to city gas distribution (CGD) companies—impacting their margins and prompting price hikes for CNG consumers.
The earlier auction-based allocation mechanism for New Well Gas has been replaced with a quarterly pro-rata system to ensure more reliable and timely supply. GAIL will now allocate NWG to CGD entities in proportion to their demand, in line with existing guidelines, the ministry stated.
Despite growing demand from the CGD sector, the government said that allocation ratios of domestic gas have been largely preserved. While in the Q3FY25, 54.68% of projected demand was allocated, in Q1FY26, the government has allocated 55.68% domestic gas and has projected it to be 54.74% in Q2FY26.
Both APM gas and NWG prices are benchmarked to the Indian Crude Basket and recalculated monthly. With recent declines in crude prices, the government expects this move to enhance affordability for CNG and PNG consumers.
“These strategic measures by the government will lead to enhanced ability of CGD entities to forecast demand and manage supply efficiently, improved supply predictability and better affordability for CGD companies due to crude-linked pricing. These measures will ensure a stable, affordable, and transparent domestic gas supply system for the critical transport and domestic segments under the CGD network, benefitting millions of urban and semi-urban consumers across India,” the government said.
The recent deallocation of APM gas—up to 20%—has led to a substitution with equal or higher volumes of the relatively costlier NWG. This has sparked concerns over a possible uptick in CNG prices by CGD companies. City gas distributors such as Indraprastha Gas, Mahanagar Gas, and Adani Total Gas rely on government-allocated domestic gas to meet PNG and CNG demand. The current government-set price for domestic gas stands at $6.75 per MMBtu.
Source: The Financial Express
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