Government Tweaks City Gas Policy to Advance Quarterly Allocations for CNG and PNG Retailers

The Indian government has revised its city gas policy to allocate natural gas to CNG and piped cooking gas retailers two quarters in advance, giving them greater clarity on supplies. The move aims to strengthen the allocation framework for domestic natural gas, promoting cleaner energy access and enhancing energy security. The policy changes will be effective from April 2025, with allocations including gas from new wells drilled on nomination fields of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL).

The Indian government has introduced significant changes to its domestic gas allocation policy, aiming to enhance the framework for sustained availability and affordability of natural gas. Effective from the first quarter of fiscal 2026, the new policy will allocate natural gas to compressed natural gas (CNG) and piped natural gas (PNG) segments on a two-quarter advance basis [1].

The policy shift includes the integration of new well gas (NWG) from nomination fields of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL). Previously, auction-based allocation for new well gas has been replaced with a quarterly pro-rata allocation to ensure timely and reliable supply [2]. This change is designed to address the recent decline in crude prices, making natural gas more affordable for CNG and PNG consumers.

City gas distribution companies, such as Mahanagar Gas Ltd (MGL), Indraprastha Gas Ltd (IGL), and Gujarat Gas Ltd (GUJGASLTD), have been facing margin squeezes due to the reduction in APM gas allocation. The government has cut APM gas allocation to these companies by 18%-20% effective April 16, leading to the introduction of the new policy measures [3].

The new policy aims to provide greater clarity to city gas retailers, enhancing their planning and delivery efficiency. The allocation of domestic gas will now include gas from new wells, priced slightly higher than APM gas but linked to the Indian crude basket prices, which are calculated monthly [2]. This move is expected to improve the predictability and affordability of domestic gas supplies for key public-facing segments such as transport and domestic cooking.

The government's strategic measures will also lead to enhanced ability for city gas distribution entities to forecast demand and manage supply efficiently. These measures are aligned with the vision of promoting cleaner energy access, enhancing urban air quality, and bolstering domestic energy security [2].

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3QW0K3:0-india-revamps-gas-policy-to-boost-affordability-and-supply/
[2] https://www.business-standard.com/industry/news/govt-tweaks-city-gas-policy-moves-to-advance-quarterly-allocations-125041800772_1.html
[3] https://www.business-standard.com/industry/news/ongc-s-cheaper-apm-gas-supply-dips-costlier-supply-to-distributors-doubles-125041800531_1.html