Centre Offers States 10% Extra Commercial LPG Allocation for Supporting PNG Shift

The Centre announced on March 18, 2026, that it is prepared to allocate up to 10% additional commercial LPG to states that actively facilitate a shift from LPG to piped natural gas (PNG). The move comes at a time when the national LPG supply outlook remains uncertain due to the ongoing Middle East crisis.

Currently, oil marketing companies (OMCs) provide states with 20% commercial LPG allocation, and the Centre believes expanding this to 30% would be beneficial if states commit to reforms that reduce long‑term LPG dependence. The policy is framed as an incentive-based mechanism to encourage wider PNG adoption while easing demand pressures on LPG cylinders.

Government Flags LPG Shortage and Incentivises Transition

The government highlighted that the present LPG shortage scenario requires a balanced and strategic distribution approach. With commercial LPG allocation set at 20%, the Centre’s proposal to add another 10% is tied to states enabling a shift towards PNG.

Officials noted that diversifying fuel usage is essential to stabilise supply chains during the ongoing geopolitical disruptions. The Centre reiterated that states implementing structural reforms will be prioritised for increased allocation.

Reform Tranches Linked to Additional LPG Allocation

To qualify for additional allocation, the Centre has outlined four reform-linked tranches totalling 10% of the commercial LPG quota. The first tranche offers 1% for establishing empowered state and district committees with local body representation, which is mandatory for accessing further incentives.

The second provides 2% for granting deemed permissions to CGD applications within 24 hours or through a single-window mechanism, while the third allocates 3% for implementing a ‘Dig and Restore’ policy using bank guarantees. The final 4% tranche is available to states that reduce annual rental or lease charges for CGD networks to zero.

Government Urges Avoiding Panic Booking of LPG Cylinders

The Centre also appealed to consumers to avoid panic booking of LPG cylinders. Officials noted that demand has spiked in recent weeks, creating operational pressures despite ongoing supply management.

PNG is being promoted as a viable alternative, especially in urban and peri‑urban regions with existing network readiness. The government emphasised that reducing panic-driven consumption patterns is essential to maintain stability.

Rapid Growth in PNG Connections Signals Shift in Consumption

The government reported that over 1 lakh new PNG connections have been rolled out in the last 2 weeks. This acceleration reflects changing consumer preferences and improved CGD infrastructure rollout.

States participating in the reform-linked incentive scheme may further accelerate PNG penetration. News reports stated that the availability of sufficient LNG supplies is helping facilitate this shift.

Read More: India’s LPG Consumption Falls 17.7% In Early March Amid West Asia Supply Disruptions.

Conclusion

The Centre’s decision to offer up to 10% more commercial LPG to states marks a strategic step to manage supply challenges while promoting PNG adoption. By linking additional allocation to a set of reforms, the government seeks to strengthen CGD infrastructure and reduce long‑term dependence on LPG cylinders.

Rising PNG connections and sufficient LNG supply further support the policy direction. The initiative reflects a broader effort to stabilise energy distribution and encourage cleaner, more reliable fuel systems across states.

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