Govt regulates natural gas allocation amid Hormuz disruption, prioritises domestic LPG consumers & CNG

New Delhi: The government has issued an order regulating the allocation and supply of natural gas across sectors after disruptions to liquefied natural gas (LNG) shipments through the Strait of Hormuz, invoking powers under the Essential Commodities Act to prioritise critical consumption segments.

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According to sources, the Gazette notification has been issued to enable “supply management” following a shortage in LNG supplies that were expected to be delivered through the Strait of Hormuz. The order effectively transfers the shortfall in supplies to non-priority sectors while diverting available LNG stocks to priority sectors.

The Natural Gas (Supply Regulation) Order, 2026, notified by the Ministry of Petroleum and Natural Gas on March 9, empowers the government to direct sector-wise allocation and diversion of natural gas, including LNG and regasified LNG, to ensure equitable distribution and continued availability for priority sectors.

“The government has issued orders, absorbed adjustments (in LPG supply) at the industrial level,” official sources said.

Priority allocation for domestic gas use

Under the notification, natural gas supplies to priority sectors will be protected based on their recent consumption patterns. Domestic piped natural gas (PNG), compressed natural gas (CNG) for transport, LPG production and essential pipeline operations will receive supplies equivalent to 100 percent of their average consumption over the past six months, subject to operational availability. In addition, the government has increased the lock-in period for booking LPG cylinders from 21 days to 25 days to prevent black marketing and hoarding.

Fertiliser plants will be ensured 70 percent of their average gas consumption over the previous six months, while gas supplied to industrial users through the national gas grid and city gas distribution networks will be maintained at around 80 percent of recent consumption levels depending on availability.

The order notes that natural gas, including regasified LNG, is a critical input for several sectors such as domestic PNG supply, CNG for transport, fertiliser production, LPG production and industrial activities.

Supply curbs for petrochemicals, power plants

To maintain supplies to priority sectors, the government has authorised the diversion of gas from lower-priority consumers. The notification states that gas supplies to petrochemical facilities and power plants may face partial or full curtailment to meet the priority allocation requirements.

It specifically lists facilities such as ONGC Petro additions Limited, GAIL’s Pata Petrochemical Complex, Reliance O2C and other high-pressure, high-temperature gas consumers among the industrial users whose gas supply may be reduced, if required. These consumers, will, however, receive their Administered Price Mechanism (APM) gas allocation.

Oil refining companies have also been directed to absorb part of the LNG disruption by reducing their gas allocation to roughly 65 percent of their average consumption over the past six months, subject to operational feasibility.

Committee formed to address commercial LPG concerns

Even though the government has prioritised domestic LPG consumption, it is also working to address supply concerns of commercial users, like restaurants. “When there is a war situation, and a choice needs to be made between domestic consumers and commercial consumers (of LPG), then the government’s priority has to be domestic consumers,” sources said.

“However, we have set up a committee comprising of three Executive Directors of OMCs to look into the issues being faced by the commercial consumers of LPG,” sources added.

“How much allocation can be made to commercial consumers of LPG is something that is being worked out by the committee,” the sources said.

Gas pooling and implementation

The order also puts in place an operational mechanism for gas diversion and pooling. Gas Authority of India Limited (GAIL), in coordination with the Petroleum Planning and Analysis Cell (PPAC), will manage the reallocation of natural gas supplies and submit pricing details for diverted volumes.

PPAC will notify a pooled price for gas diverted from non-priority sectors to priority consumers, while entities receiving pooled gas will be required to accept the revised pricing and not challenge the arrangement through litigation even if it differs from existing contractual terms.

Directions to gas producers and distributors

The order directs all entities involved in the production, import, transportation and marketing of natural gas to comply immediately with the revised supply framework. These include domestic producers such as ONGC, Oil India, Reliance Industries and Vedanta, gas marketing entities including GAIL, LNG terminal operators, pipeline operators and city gas distribution companies.

The notification also states that the provisions of the order will override existing gas sale agreements and other commercial arrangements where inconsistencies arise.

In addition, all producers, importers, marketers and distributors of natural gas, including LNG and regasified LNG, have been directed to furnish information on production, imports, stocks, allocation and consumption to the government, with PPAC designated as the nodal agency for information reporting.

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In a joint statement issued on Tuesday, Indian Oil Corporation Limited, Bharat Petroleum Corporation and Hindustan Petroleum Corporation said that the Petroleum Ministry has initiated steps to increase LPG production and secure adequate stocks for household consumers as well as essential non-domestic sectors.

“In the light of current geopolitical disruptions to fuel supply and constraints on the supply of LPG, Ministry has taken the step for higher LPG production and securing it for supplying to domestic customers. Along with ensuring supplies to all domestic customers, it has been decided to make supplies as per requirement to the essential non domestic sectors such as hospitals, educational institutions, etc. For LPG supply to other non-domestic sectors, a committee of three Executive Directors of Oil Marketing Companies have been constituted to review the representations and prioritise the LPG supply,” the joint statement said.

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