Govt tweaks city gas policy, moves to advance quarterly allocations

New Delhi: The government will now allocate natural gas to CNG and piped cooking gas retailers two quarters in advance to give city gas companies greater clarity, the Oil Ministry said Friday.

With city gas retailers like Indraprastha Gas Ltd, Mahanagar Gas Ltd and Adani-Total Gas Ltd reporting pressures on margins after the allocation of cheaper administered price or APM gas to them was cut without giving enough advance notice, the ministry decided to tweak the allocation policy.

"From Q1 (first quarter) of FY 2025-26 (April 2025 to March 2026 financial year), domestic natural gas allocations for CNG (Transport) and piped natural gas (domestic household cooking gas) segments will be done on a two-quarter advance basis," the ministry said in a statement.

Besides the lower-priced APM gas produced from old fields given on a nomination basis, the allocation will also now include gas from new wells drilled on the nomination fields of state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), it added.

The gas from new wells is slightly more expensive than the APM gas.

While APM gas currently is priced at $6.75 per million British thermal units, the new well gas comes to close to $8 per MMBtu.

"Estimations by GAIL and ONGC will help ensure supply visibility to CGD entities in advance, enhancing planning and delivery efficiency," it said.

GAIL is the state-owned marketer of gas.

The ministry said new well gas allocation will be done on a pro-rata basis.

"Auction-based allocation for new well gas has been replaced with a quarterly pro-rata allocation to ensure timely and reliable supply. GAIL will allocate new well gas to city gas distribution (CGD) entities in proportion to their requirements, in accordance with prevailing Ministry of Petroleum and Natural Gas guidelines," the statement said.

The move comes within days of GAIL intimating the city gas retailers of up to 20 per cent cut in APM gas supplies effective April 16 because of a fall in production at ONGC end. The lost volumes were made good by the supply of new well gas.

"The government has introduced key policy measures aimed at strengthening the allocation framework for domestic natural gas, in alignment with its vision of promoting cleaner energy access, enhancing urban air quality, and bolstering domestic energy security," the ministry said, adding that with a focus on ensuring the sustained availability and affordability of natural gas for key public-facing segments - Compressed Natural Gas (CNG) used in transport and Piped Natural Gas (PNG) used in domestic households for cooking - the ministry has introduced the important enhancements to the Domestic Gas Allocation Policy.

Despite increasing demand in the CGD sector, allocation ratios of domestic gas have broadly been maintained at 54.68 per cent of the projected demand allocated gas in October-December of 2024-25. It, however, did not give the allocation made in January-March (the fourth quarter of the 2024-25 fiscal).

In Q1 of 2025–26 (April-June 2025), 55.68 per cent allocation was made and in Q2 2025–26 (July-September 2025), 54.74 per cent allocation is projected to be made, the statement said.

"Broad trajectory in domestic gas allocation reflects the government's commitment to prioritise public-facing segments like transport and domestic cooking," it noted.

On pricing, it said as both APM gas and new well gas (NWG) prices are linked to Indian crude basket prices, calculated monthly, the recent decline in crude prices will make domestic "more affordable" for CNG (T) and PNG (D) consumers.

"These strategic measures by the government will lead to enhanced ability of CGD entities to forecast demand and manage supply efficiently, improved supply predictability and better affordability for CGD companies due to crude-linked pricing. These measures will ensure a stable, affordable, and transparent domestic gas supply system for the critical transport and domestic segments under the CGD network, benefitting millions of urban and semi-urban consumers across India," it added.