The Government of India has introduced a revised natural gas allocation policy to protect essential domestic consumption as the conflict between the United States and Iran disrupts global energy supply routes.

According to a government gazette notification issued late Monday night, domestically produced natural gas will now be allocated on a priority basis to four key sectors, ensuring that households and essential industries continue receiving adequate fuel supplies.

LPG Added to Priority Allocation

Until now, only compressed natural gas (CNG) used in transport and piped natural gas (PNG) supplied to households were prioritised in domestic gas allocation.

Under the revised framework, liquefied petroleum gas (LPG) production has also been included among the top priority sectors.

The notification states that the requirements of LPG, CNG, and piped gas suppliers will be fully met first, with these sectors receiving 100% of their average gas consumption over the past six months before any allocation is made to other industries.

LPG is typically produced through natural gas processing and as a by-product of crude oil refining. It mainly consists of propane and butane gases that are compressed into liquid form for use in cooking cylinders widely used across Indian households and restaurants.

Fertiliser Sector Next in Line

After household and transport gas requirements are secured, the fertiliser sector will receive priority.

Under the revised allocation rules, fertiliser plants will receive at least 70% of their average gas consumption from the previous six months, depending on operational availability.

Authorities have also directed that the allocated gas must be used strictly for fertiliser production and cannot be diverted for other industrial purposes.

Industrial and Commercial Users

The third priority category includes tea estates, manufacturing units, and other industrial consumers, which will receive about 80% of their average gas consumption over the last six months, subject to supply availability.

City gas distribution companies supplying gas to industrial and commercial users have been placed in the fourth priority category, and they must ensure similar supply levels to their customers.

Domestic Gas to Be Diverted from Other Sectors

India currently produces roughly half of its daily natural gas consumption—about 191 million standard cubic metres per day. To meet the revised priority allocations, domestic gas will be diverted from sectors such as petrochemical plants, power generation units, and other high-priced gas consumers.

Additionally, oil refining companies have been instructed to absorb part of the supply disruption by reducing gas consumption to approximately 65% of their recent average levels.

The state-run gas utility GAIL has been assigned the responsibility of managing gas distribution and implementing the revised allocation order.

Strait of Hormuz Crisis Triggers Energy Concerns

The policy change follows major disruptions in global energy shipping through the Strait of Hormuz.

Following military strikes involving the United States and Israel against Iran and Tehran’s retaliation across the region, maritime traffic through the strait has declined sharply. Shipping insurance costs have surged, and several LNG suppliers have reportedly invoked force majeure clauses.

The Strait of Hormuz handles around one-fifth of the world’s seaborne oil trade and nearly one-third of global LNG shipments, making it a crucial energy corridor for countries including India.

With tanker movements affected, the Indian government has adjusted domestic gas allocations to ensure uninterrupted supply for household cooking fuel and transport needs, while maintaining essential industrial operations.

Summary

The Government of India has revised its natural gas allocation policy to prioritise four key sectors amid global energy disruptions caused by the US-Iran conflict. LPG production has been added to the priority list alongside CNG and piped household gas, ensuring these sectors receive 100% of their recent average gas consumption. Fertiliser plants, industrial users, and city gas distribution companies will receive reduced but guaranteed supplies as domestic gas is redirected to safeguard essential household and transport energy needs.

Disclaimer

This article is based on publicly available information and official statements. The content is intended for informational purposes only. The publication does not independently verify third-party claims or assertions mentioned in the developments.