Government Weighs Incentive Rollout for City Gas Distribution Network

The Central Government is considering an incentive scheme for City Gas Distribution (CGD) companies, according to a report by ET Now on May 15, 2026.  

The proposal comes as gas distributors continue to face pressure from higher input costs following disruptions in global LNG supplies. 

The scheme is still at a preliminary stage, and details related to the structure, eligibility criteria, and financial outlay have not been announced. The Ministry of Petroleum and Natural Gas is yet to issue an official statement on the matter. 

Rising Gas Costs After West Asia Disruption 

The development follows the closure of the Strait of Hormuz in March 2026, which affected global LNG trade routes and pushed spot natural gas prices higher.  

Indian CGD companies, which supply compressed natural gas (CNG) and piped natural gas (PNG), have since been operating in a tighter cost environment. 

Retail fuel prices were revised on May 15, with CNG prices in Delhi increased to ₹79.09 per kg. Petrol and diesel prices were also raised by ₹3 per litre.  

However, the increase in CNG prices has not fully matched the rise in gas procurement costs faced by distributors. 

Dependence on APM and Market Gas 

CGD companies source gas through a combination of administered pricing mechanism (APM) gas and market-linked LNG supplies.  

The share of lower-cost APM gas available to companies plays a key role in determining overall input costs. 

With APM allocation volumes remaining limited and imported LNG prices staying elevated, companies have had to absorb part of the increase in procurement costs.  

The sector has comparatively less flexibility in revising retail prices due to the regulated framework under which CGD operations function. 

Listed Companies May Benefit 

The proposed support scheme could benefit listed CGD firms including Indraprastha Gas Limited, Mahanagar Gas Limited, Gujarat Gas, and Adani Total Gas. 

These companies operate under licences issued by the Petroleum and Natural Gas Regulatory Board across designated geographical areas for CNG and PNG distribution. 

Read More: Maharashtra Government Cuts VAT on ATF to 7% from 18% Amid High Jet Fuel Prices! 

Conclusion 

The government has not finalised the proposed incentive framework, and discussions remain at an early stage. Further details on the proposed support mechanism are awaited. 

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