Gas allocation to CGD firms on advance quarterly basis: Oil Ministry

The auction-based allocation for NWG has been replaced with a quarterly pro-rata allocation to ensure timely and reliable supply

The Ministry of Petroleum & Natural Gas (MoPNG) on Friday said that city gas distribution (CGD) firms will be allocated natural gas two quarters in advance to aid them in better demand forecasting, efficient supply management and ensuring supply predictability.

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 MoPNG has introduced important enhancements to the domestic gas allocation policy, the Ministry said.

“From Q1 FY26, domestic natural gas allocations for CNG (T) and PNG (D) segments will be done on a two-quarter advance basis. Allocation will also now include New Well Gas (NWG) from nomination fields of ONGC and Oil India. Estimations by GAIL and ONGC will help ensure supply visibility to CGD entities in advance, enhancing planning and delivery efficiency,” it added.

Besides, the auction-based allocation for NWG has been replaced with a quarterly pro-rata allocation to ensure timely and reliable supply. GAIL will allocate NWG to CGD entities in proportion to their requirements, in accordance with prevailing MoPNG guidelines.

The Ministry emphasised that despite increasing demand in the CGD sector, allocation ratios of domestic gas have broadly been maintained.

For instance, it said that for Q3 FY25, 54.68 per cent of the projected demand was allocated. Similarly, for Q1 FY26 and Q2 FY26, 55.68 per cent and 54.74 per cent of the demand (Projected) has been allocated.

“As both APM gas and New Well Gas prices are linked to Indian Crude Basket prices, calculated monthly, with the recent decline in crude prices, this allocation of domestic gas would make natural gas more affordable for CNG (T) and PNG (D) consumers,” the Ministry said.

Strategic measures

These strategic measures 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.

The development comes after GAIL had informed the CGD firms about the 15-20 per cent cut in administered price mechanism (APM) gas from April 16 due to a fall in production at ONGC. The lost volumes were supplied from NWG.

Sehul Bhatt, Director of Research at Crisil Intelligence, said “The recent reduction in allocation of APM gas for CNG will likely prompt CNG players to hike prices by ₹1-2 per kg to maintain their margins. Following the 15-20 per cent reduction from the second fortnight of April, CNG players have to procure from new well gas, difficult fields and imported LNG.”

Besides, the latest reduction takes the cumulative reduction in allocation since the beginning of last fiscal to around 45 per cent amid multiple revisions. Over this period, while most players have increased retail CNG prices by ₹2-5 per kg, some have absorbed part of the hike to maintain volume growth despite the dent on margins, he added.

Published on April 18, 2025