Amid growing disruptions in global energy supplies caused by the widening conflict in West Asia, the Government of India has issued the Natural Gas (Supply Regulation) Order, 2026 to ensure equitable distribution of gas and protect supplies to priority sectors.
The order, notified by the Ministry of Petroleum and Natural Gas under the Essential Commodities Act, 1955, aims to maintain stable supplies for essential uses such as domestic cooking gas through pipelines, compressed natural gas (CNG) used in vehicles, and fertiliser production. The move comes after disruptions in liquefied natural gas (LNG) shipments passing through the Strait of Hormuz, a critical global energy corridor.
According to the notification, the government has revised the priority order for allocation of domestically produced natural gas, placing piped natural gas (PNG) for households, CNG for transport and LPG production at the top of the list. These sectors will receive 100% of their average gas consumption during the past six months, ensuring that household cooking needs and public transport services remain largely unaffected.
The fertiliser sector has been placed second in the priority order. Fertiliser plants will receive at least 70% of their average gas consumption over the past six months, subject to operational availability. The notification also specifies that the allocated gas must be used exclusively for fertiliser production and cannot be diverted for other purposes.
Industrial sectors such as tea processing, manufacturing and other industries connected to the national gas grid have been placed at the third priority level. These sectors will receive around 80% of their average gas consumption over the past six months, depending on available supplies.
City gas distribution (CGD) networks supplying gas to industrial and commercial establishments have been placed fourth in the priority order, with similar restrictions limiting supplies to about 80% of their previous consumption levels.
Gas Supply to Be Diverted from Non-Priority Sectors
To ensure adequate supplies to priority sectors, the government has decided to divert domestically produced gas by curtailing supplies to petrochemical plants, power stations and other high-consumption industrial users.
India currently consumes about 191 million standard cubic metres per day (mmscmd) of natural gas, of which nearly half is met through domestic production while the remaining demand is fulfilled through LNG imports.
Under the new allocation framework, gas supplies to petrochemical facilities - including plants operated by companies such as ONGC Petro additions Limited, GAIL’s Pata Petrochemical Complex and Reliance’s oil-to-chemicals business - may be partially curtailed. Gas supply to power plants may also be reduced if required. Oil refining companies have also been asked to absorb part of the supply disruption by reducing gas consumption at refineries to around 65% of their average usage over the past six months.
State-owned gas utility GAIL has been tasked with implementing the revised allocation system and managing gas supplies to ensure that priority sectors receive adequate fuel.
Strait of Hormuz Disruption Triggers Energy Concerns
The government’s intervention comes after escalating military tensions in West Asia disrupted maritime trade in the region. Following strikes involving the United States, Israel and Iran, shipping traffic through the Strait of Hormuz, one of the world’s most important energy transit routes, has declined sharply. Nearly one-fifth of global seaborne oil shipments and around one-third of LNG trade pass through the narrow waterway connecting the Persian Gulf to international markets.
The conflict has led to a surge in insurance costs for energy tankers and raised concerns over the reliability of LNG supplies. Several suppliers have reportedly invoked force majeure clauses, citing disruptions in shipments.
India relies heavily on the Gulf region for its energy imports, including LNG and LPG. With tanker movements slowing down, the government has reworked domestic gas allocations to ensure uninterrupted supplies for critical sectors such as household cooking and public transport.
Commercial LPG Shortage Hits Hospitality Sector
While the revised allocation is aimed at protecting essential sectors, the hospitality industry has already begun reporting shortages of commercial LPG cylinders. According to industry representatives, supply disruptions have intensified over the past week. In several regions, deliveries of commercial LPG cylinders have slowed significantly or stopped altogether.
Pradeep Shetty, Vice-President of the Federation of Hotel and Restaurant Associations of India (FHRAI), said hotels and restaurants across cities such as Mumbai, Pune, Aurangabad and Nagpur are facing severe supply constraints.
He noted that confusion among suppliers and distributors following the government’s March 5 notification has worsened the situation, with many distributors temporarily halting supplies of commercial LPG cylinders to hotels and food service establishments. Similar shortages are also being reported in Karnataka, Telangana and Andhra Pradesh, raising concerns within the hospitality industry.
“If the situation does not improve within the next two days, nearly 50% of hotels and restaurants in Mumbai may be forced to temporarily suspend operations, depending on the LPG stock they currently have,” Shetty warned.
Balancing Energy Security and Supply Stability
The government’s latest order reflects growing concerns over energy security amid geopolitical tensions. By prioritising gas supplies to essential sectors such as households, transport and fertiliser production, the policy seeks to protect critical economic activities and limit the impact of international supply disruptions.
However, the curtailment of gas supplies to industries and commercial sectors may have ripple effects across manufacturing and services if the crisis continues for an extended period. For now, the government hopes the new allocation framework will help stabilise domestic gas supplies until global energy trade routes return to normal.