Government Prioritises Domestic Gas Supply for LPG, CNG and PNG Amid West Asia Conflict

The government has revised the allocation framework for domestically produced natural gas, prioritising supplies for cooking fuel and transport needs as disruptions in LNG imports linked to the West Asia conflict impact energy markets. 

LPG Production Added to Priority Gas Allocation 

Under a new gazette notification, LPG production has been added to the priority list for domestic natural gas allocation, alongside compressed natural gas (CNG) used in transport and piped natural gas (PNG) supplied to households. 

Manufacturers in these three segments will now receive 100% of their average natural gas consumption over the past six months before supplies are allocated to other sectors. LPG is produced primarily through natural gas processing and crude oil refining, where propane and butane gases are separated, purified and liquefied for distribution in cylinders used in homes and commercial kitchens. 

Sector-Wise Gas Allocation Framework 

Following the priority allocation to LPG, CNG and PNG, the fertiliser sector will receive at least 70% of its average gas consumption over the past six months, subject to operational availability. The notification also states that gas supplied to fertiliser plants must only be used for fertiliser production and cannot be diverted to other units. 

Industries such as tea manufacturing and other industrial consumers will receive about 80% of their 6 month average gas consumption, while city gas distribution (CGD) entities supplying commercial and industrial users are also required to maintain around 80% supply levels, depending on availability. Oil refineries have been asked to absorb part of the disruption by limiting gas consumption to around 65% of their previous six-month average. 

Supply Disruptions and Energy Market Impact 

India consumes around 191 million standard cubic metres of natural gas per day, with domestic production meeting about half of the demand. To secure supplies for priority sectors, gas will be diverted away from petrochemical plants, power generation units and high-priced gas consumers. 

The move follows disruptions in energy shipments after US–Israeli strikes inside Iran and Tehran’s retaliation, which reduced maritime traffic through the Strait of Hormuz, a key route that handles about one-fifth of global seaborne oil trade and nearly one-third of global LNG shipments. The government noted that LNG shipments through the Strait have been disrupted and suppliers have invoked force majeure clauses, prompting the reallocation of domestic gas. 

The notification also places pipeline compressor fuel and essential operational gas for pipeline networks in the priority category to ensure the functioning of gas transmission systems. State-owned gas utility GAIL has been tasked with managing the revised allocation framework. 

Read More: Government Seeks Lok Sabha Nod For ₹2.81 Lakh Crore Additional Expenditure! 

Conclusion 

The revised policy prioritises domestic natural gas supply for LPG, CNG and PNG production to ensure uninterrupted cooking fuel and transport energy availability amid LNG supply disruptions caused by the West Asia conflict. 

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