Govt invokes Essential Commodities Act, prioritises natural gas allocation

Government issues Natural Gas (Supply Regulation) Order, 2026 prioritising supply to CNG, PNG and LPG production as LNG shipments face disruption due to conflict in West Asia

With the ongoing conflict in West Asia disrupting liquefied natural gas (LNG) shipments through the Strait of Hormuz and key suppliers invoking the force majeure clause, the government has issued an order for the diversion of natural gas to the economy's priority sectors. 

The Essential Commodities Act, 1955, confers power to the central government to regulate the supply, distribution and trade of petroleum and petroleum products for maintaining their supplies or for securing their equitable distribution. 

The Natural Gas (Supply Regulation) Order, 2026 states that supply to four sectors will receive priority allocation, maintained at 100 per cent of their average gas consumption over the past six months. 

 

This includes domestic piped natural gas (PNG), compressed natural gas (CNG) for transport, liquefied petroleum gas (LPG) production, including LPG shrinkage requirements, and pipeline compressor fuel and other essential pipeline operational requirements. 

The second priority has been accorded to the supply of natural gas for fertiliser plants that will be ensured 70 per cent of their past six months' average gas consumption, subject to operational availability. 

The third priority sector includes tea industries, manufacturing and other industrial consumers supplied through the national gas grid who will be maintained at 80 per cent of their past six-month average gas consumption. 

As the fourth order of priority allocation, the industrial and commercial consumers of City Gas Distribution (CGD) entities will receive 80 per cent of their past six month average gas consumption.

 

“The gas required to meet the priorities shall be through full or partial curtailment of gas supplied in the following order of priority: Petrochemical facilities not limited to ONGC Petrol additions limited; GAIL Pata Petrochemical Complex; Reliance O2C and other high-pressure high temperature gas consumers; and power plants as required," the order stated. 

The order also states that oil refining companies will absorb the impact of LNG supply disruption to the extent feasible by reducing gas allocation to refineries to approximately 65 per cent of the past six month gas consumption, subject to operational feasibility. 

Under the new arrangement, GAIL India will manage the supplies of natural gas to implement the directions of the priority allocation, in coordination with petroleum planning and analysis cell (PPAC), for which it will submit the invoice price of every diverted volume of natural gas to PPAC. 

“A pooled price shall be notified by the PPAC for the natural gas diverted from non-priority sectors to priority sectors as specified. The entities from priority sector to whom the pooled gas is supplied shall give an undertaking that the pooled price is acceptable to them and they shall not make the force majeure mitigation supply subject to any litigation as this may be at variance with their existing contracts,” the order stated. 

The order also directs all the entities involved in production, import, marketing, transportation and supply of natural gas to comply with the directions, including revision of supply schedules, diversion of supplies and sector-wise allocation of natural gas as directed by the Centre in coordination with GAIL. 

This includes ONGC, RIL, OIL, Vedanta and other domestic natural gas producers, GAIL and other gas marketing entities, LNG terminal operators, natural gas pipeline operators, and city gas distribution entities.