- Approval from Govt to increase PNG connectivity
- Effective from September 1, 2026. Under this scheme, CGD companies making active domestic PNG connections above target will get additional allocation of 200 SCM domestic APM gas for each additional connection.
- The government hopes that this will speed up the expansion of the PNG network and will also make gas cheaper
Gas Cylinder: The government has launched a new initiative to provide piped natural gas to more households in the country. The Ministry of Petroleum and Natural Gas has approved an incentive scheme to increase domestic piped natural gas (PNG) connections. It has also been said that this scheme will be implemented from September 1, 2026. The scheme aims to supply PNG to households that already have connections, but have not yet started paying bills or consuming gas. Emphasis will also be placed on expanding the PNG network to new areas.
According to the government, there are currently approximately 17.4 million domestic PNG connections in the country. This new scheme will help gas distribution companies to expand more active connections. The government hopes that this will give companies the financial leverage to extend pipelines to new homes and provide families with a clean, convenient and consistent gas option for their kitchens. The initiative comes at a time when issues related to the Strait of Hormuz have also affected LPG supplies in the country.
Additional gas allocation for each new active connection
Cities eligible to benefit from this scheme Gas delivery (CGD) companies will. If a company adds more new billable domestic PNG connections than its target, it will get an additional share of 200 standard cubic meters (SCM) of domestically produced APM (administered pricing mechanism) gas for each additional connection. This natural gas is also controlled by the government and extracted from old fields.
APM Gas is generally available at lower cost than other expensive gas sources. Therefore, getting additional gas can reduce the total gas purchase cost of the companies. The government believes this will provide financial incentives to companies to provide PNG connections to more households.
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This scheme will be implemented in two phases
This government incentive scheme will be implemented in two phases, each phase lasting six months. Companies that start their billing by executing more domestic PNG additions than the target set for their geographic area will get this benefit.
Companies will be able to use additional APM gas to replace the expensive LNG they are currently buying for their CNG transportation business. This is expected to reduce the overall purchase cost of gas. This means that adding new domestic PNG additions can be more profitable for companies than ever before.
Connection cost
According to the government, this scheme can help companies recover their investment costs in PNG network and connections faster. Currently, it takes approximately 10 years to recover the capital cost on a domestic PNG connection. These incentives are expected to reduce this period to approximately 3 years.
A direct benefit of this could be that CGD companies will rapidly expand the pipeline network to new areas and operationalize connections that are not currently in use. This will enable more households to start using piped gas.
Government is also focusing on making PNG cheaper
The government is urging states to reduce VAT on natural gas to 5%. A reduced tax could help reduce the cost of PNG for households. The government aims to make PNG accessible to more families and make it an easy and affordable option for cooking.
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How much cheaper can PNG become if VAT is removed?
If a state completely removes the 5% VAT on natural gas, the tax component in PNG bills may come down. For example, if the price of PNG is ₹50 per scm, then 5% VAT will be approximately ₹2.50 per scm. If VAT is removed, the corresponding cost may be approximately ₹47.50 per SCM. However, the actual reduction in the bill will depend on the taxation system of the state, cost of gas purchase and charges of the local CGD company. This means that the removal of VAT may make PNG somewhat cheaper.