The central government has approved the Incentive Scheme for Promotion of Domestic Piped Natural Gas (PNG) Connections with effect from September 1, 2026 to accelerate the rollout of clean cooking fuel to households. The scheme will reward City Gas Distribution (CGD) companies with cheaper domestic gas for every additional working connection they activate. With India currently at 1.74 crore domestic PNG connections, the move seeks to close the gap between installed pipelines and actually billed households.
What Is the New PNG Incentive Scheme?
The Incentive Scheme for Promotion of Domestic PNG Connections is a performance linked supply side measure approved by the Ministry of Petroleum and Natural Gas (MoPNG). MoPNG is the nodal ministry for exploration, production, refining, distribution and pricing of petroleum, natural gas and petroleum products. The scheme aims to expand household access to Piped Natural Gas (PNG), which is natural gas, mainly methane, supplied through underground mild steel and polyethylene pipelines for cooking.
Unlike a direct cash subsidy to consumers, the scheme incentivises the distributors. India has a dual gas pricing system. Administered Pricing Mechanism (APM) gas is gas produced from legacy nomination fields of state owned producers Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) and sold at a government regulated lower price. Other gas, such as imported Liquefied Natural Gas (LNG), is bought at market prices and is costlier. By offering more APM gas to efficient distributors, the government lowers their procurement cost without spending budgetary subsidy.
The scheme has two clear objectives. First, to convert unbilled or inactive connections into billed and gas flowing connections. Data indicates that while more than 1.6 crore PNG connections have been installed, only about 1 crore to 1.1 crore are actively consuming gas, leaving lakhs of dormant meters. Second, to push CGD entities to extend networks to new households and housing societies where pipelines have already been laid but last mile connectivity is pending.
How the Incentive Mechanism Works
The operating principle is simple. More active household kitchens mean more cheap gas for the distributor to use in its more profitable transport business. The additional cheap domestic gas is not meant to be sold as PNG itself, but to replace costlier LNG that CGD companies currently buy for their Compressed Natural Gas (CNG) segment, which supplies vehicles. This substitution reduces overall gas sourcing cost and improves margins, giving companies a financial reason to activate domestic connections quickly.
The Petroleum and Natural Gas Regulatory Board (PNGRB), a statutory body constituted under the Petroleum and Natural Gas Regulatory Board Act, 2006 and headquartered in New Delhi, authorises CGD networks across Geographical Areas and monitors performance. The Petroleum Planning and Analysis Cell (PPAC) under MoPNG notifies APM prices. Under revised guidelines approved by the Cabinet Committee on Economic Affairs in April 2023, APM gas price is set at 10 percent of the monthly average of the Indian Crude Basket, notified monthly, with a floor of $4 per million British thermal unit (MMBtu) and a ceiling which was $6.50 per MMBtu for 2023-24 and 2024-25 and was raised to $6.75 per MMBtu in 2025-26 and $7 per MMBtu in April 2026. In contrast, spot LNG prices have been volatile, ranging from $10 to $20 per MMBtu in 2025-26, making APM gas significantly cheaper.
Threshold, Tranches and the 200 SCM Formula
Eligible CGD entities will receive an additional 200 Standard Cubic Metres (SCM) of APM gas for every incremental billed domestic PNG connection achieved above a prescribed threshold level fixed separately for each Geographical Area (GA). A GA is the licensed area awarded by PNGRB to a CGD entity for laying distribution networks, typically covering one or more districts. The threshold prevents windfall gains for connections that would have happened anyway and rewards only over and above performance.
The scheme will be implemented in two tranches over a period of six months. Performance in each tranche will be measured against the GA specific baseline, and the additional APM allocation will be provided accordingly. This design creates immediate pressure to convert dormant connections and acquire new consumers within a defined window.
According to the government, the saving from cheaper gas will cut the payback period for capital expenditure on a domestic PNG connection from around 10 years to about 3 years. Laying last mile pipelines, installing meters and risers inside buildings requires upfront investment. With faster cost recovery, companies are more likely to invest in dense urban clusters as well as Tier II and Tier III cities where network utilisation is still low.
| Feature | Detail |
|---|---|
| Effective date | September 1, 2026 |
| Nodal ministry | Ministry of Petroleum and Natural Gas |
| Beneficiaries | Eligible City Gas Distribution (CGD) entities |
| Incentive | 200 SCM of additional APM gas per incremental billed domestic PNG connection above GA threshold |
| Duration | Two tranches over six months |
| Use of incentive gas | To replace LNG in CNG (transport) segment, lowering sourcing cost |
| Current domestic PNG base | 1.74 crore connections |
Why Domestic PNG Matters: PNG vs LPG
For most Indian households cooking still means a Liquefied Petroleum Gas (LPG) cylinder, which contains mainly propane and butane. Government data suggests that about 95 percent of household gas connections are LPG and only about 5 percent are PNG. LPG is portable and reaches rural areas, and is subsidised for eligible households under the Pradhan Mantri Ujjwala Yojana, but it requires booking, storage, handling and periodic replacement. More than 60 percent of LPG consumed in India is imported, exposing prices to global shocks such as the West Asia disruptions in early 2026.
Piped Natural Gas (PNG) is the same natural gas that is compressed as CNG for vehicles or chilled as LNG for import, but supplied in gaseous form through pipelines at low pressure. Its advantages for households are distinct. PNG is supplied 24x7 without cylinder booking, billed on metered consumption so households pay only for what they use, and is generally 12 to 18 percent cheaper than non subsidised LPG on a per unit energy basis. Being lighter than air, it disperses quickly in case of a leak and does not require storage inside the kitchen, which improves safety. It also burns cleaner, with lower particulate and sulphur emissions, which helps indoor air quality.
The government has highlighted that PNG obviates handling hassles and provides uninterrupted pressure through a looped network. In a period when LPG supply was constrained and the government had to invoke priority allocation for domestic PNG and CNG and rationalise commercial LPG supply, pipeline gas offered more stable availability in cities where infrastructure exists.
| Parameter | PNG | LPG |
|---|---|---|
| Composition | Mainly methane | Mainly propane and butane |
| Supply | Continuous through underground pipelines | Periodic 14.2 kg cylinder delivery |
| Pricing example 2026 | About ₹48 to 52 per SCM in Delhi/Mumbai | About ₹912 to 915 per cylinder non subsidised |
| Safety | Lighter than air, disperses quickly | Heavier than air, settles on floor |
| Coverage | Limited to CGD covered cities | Pan India including rural areas |
| Import dependence | About 50 percent domestic gas share | Over 60 percent imported |
The gap between installed and active connections shows the potential. As of March 2026, there were over 1.62 crore installed domestic PNG connections but only about 1.03 crore active billed consumers, leaving more than 60 lakh connections inactive. Activating these connections at low incremental pipeline cost can expand clean fuel access rapidly.
City Gas Distribution Network and India’s Gas-Based Economy Goal
The scheme sits within a larger structural shift in energy policy. The government has set a target to raise the share of natural gas in India’s primary energy mix from about 6 to 6.7 percent currently to 15 percent by 2030. Natural gas is seen as a bridge fuel that is cleaner than coal and oil while supporting power, fertiliser, industry, transport and households.
The backbone for household access is the City Gas Distribution (CGD) network. CGD refers to the local network that distributes natural gas as PNG for domestic, commercial and industrial use and as CNG for transport. The Petroleum and Natural Gas Regulatory Board (PNGRB) authorises CGD development through competitive bidding. After 12 bidding rounds completed by October 2023 and subsequent rounds, PNGRB has authorised 307 Geographical Areas covering about 784 districts across 34 states and Union Territories, effectively covering close to 100 percent of India’s geographical area and about 98 percent of the population.
The scale of ambition is large. The minimum work programme targets about 12.63 crore PNG connections, 18,336 CNG stations and over 5.4 lakh inch kilometre of steel and MDPE pipeline by 2032 to 2034. Progress has been steady but gap remains. As on May 2024, about 1.31 crore PNG connections had been provided, rising to 1.44 crore by February 2025 and 1.74 crore by August 2026. The national gas grid has grown to about 29,000 kilometre operational pipeline and about 33,478 kilometre authorised. CGD entities include public sector firms such as GAIL, Indian Oil, Bharat Petroleum, Hindustan Petroleum and private players such as Indraprastha Gas Limited (IGL), Mahanagar Gas Limited (MGL) and Adani Total Gas.
Growth in CNG has outpaced PNG. In FY 2021-22 to 2023-24, CNG volumes grew at about 19 percent CAGR while PNG domestic grew at about 5.5 percent, reflecting higher returns and priority for transport. The new incentive corrects this imbalance by making domestic PNG activation financially attractive for the same companies. Domestic CGD demand is currently about 3.63 million metric standard cubic metres per day (MMSCMD) for PNG domestic within a total APM allocation to CGD of about 13.94 MMSCMD, with the rest going to CNG. India’s overall natural gas consumption is about 189 MMSCMD, of which about 97.5 MMSCMD is produced domestically and the rest is imported as LNG, leaving import dependence near 50 to 51 percent.
Increasing PNG adoption also helps energy security. Every household that shifts from imported LPG to pipeline gas reduces pressure on cylinder logistics and frees LPG for rural areas without pipeline access. It also supports climate goals by substituting more polluting cooking fuels and lowering urban emissions.
Complementary Measures to Push PNG Adoption
The incentive scheme is not a standalone move. MoPNG has listed several parallel measures to accelerate PNG adoption that precede or accompany the scheme.
First, regulatory easing. Under the Natural Gas and Petroleum Products Distribution (Through Laying, Building, Operation and Expansion of Pipelines and Other Facilities) Order, 2026, notified under the Essential Commodities Act, 1955, the government has introduced an Accelerated Approval Framework and standardised Right-of-Way charges to ensure priority disposal of pipeline laying applications within defined timelines. PNGRB has also been designated as the nodal agency to monitor implementation and has directed CGD entities to expedite domestic PNG connections.
Second, fiscal measures. States are being encouraged to rationalise Value Added Tax (VAT) on natural gas to 5 percent. Natural gas is outside the Goods and Services Tax (GST) framework, so excise duty of about 14 percent plus state VAT of 5 to 10 percent applies. This makes PNG costlier than auto LPG which attracts 18 percent GST, which has been flagged as a reason for slower CNG and PNG uptake in some southern states. Several states have already reduced VAT after central persuasion.
Third, demand generation campaigns. The National PNG Drive 2.0 covers household awareness camps, conversion of LPG based housing societies to PNG, notices to households in pipeline laid areas and a portal for surrender of LPG cylinders. To simplify the consumer journey, a unified single window PNG registration portal is under development for applying for and tracking new connections. The MyPNG-D Portal (MyPNGD.in) launched in March 2026 already allows PNG consumers to surrender LPG cylinders online using mobile number or LPG ID without visiting a dealership. Since March 2026, official briefings indicate that about 4.32 lakh PNG connections were gasified and 4.75 lakh additional customers registered for new connections, showing early momentum.
Fourth, linkage of supply. Priority allocation has been affirmed for the domestic PNG and CNG segments. MoPNG has allocated domestic gas to CNG (Transport) and PNG (Domestic) in the no cut category, diverting gas from power and other non priority sectors when needed, and PNGRB has relaxed portfolio allocation requests from GA wise to entity wise on a case basis to optimise costs.
The Way Forward
The immediate test for the scheme will be how many of the estimated 6.2 lakh plus unbilled connections are converted to billed status within the six month window and how many new housing societies adopt PNG. Because thresholds are GA specific, performance will vary. Entities in mature markets such as Delhi, Mumbai, Pune, Ahmedabad and Gujarat may cross thresholds faster, while newer GAs in eastern and northeastern states will need more groundwork.
For sustainability, three factors will matter. Stable and competitive domestic gas pricing remains crucial. APM gas ceiling at $7 per MMBtu provides some protection but domestic production has been flat to declining. India produced about 33,125 million metric standard cubic metres (MMSCM) in April-February FY25, lower than the previous year, and overall energy consumption is rising, so import dependence remains high. Continued expansion of pipeline and last mile infrastructure, along with state cooperation on VAT and Right-of-Way, will determine whether connections translate into sustained usage. Consumer awareness on safety, cost savings and the simplified online application and LPG surrender process will decide household uptake beyond the incentive period.
If the six month tranche model proves effective at shortening payback and raising activation rates, it could be extended or redesigned with differentiated incentives for difficult geographies and high rise society clusters. Success will move India closer to its 15 percent gas share target by 2030 and bring cleaner, metered cooking fuel to more urban kitchens.
Key Takeaways
- The Incentive Scheme for Promotion of Domestic PNG Connections will be effective from September 1, 2026, with Ministry of Petroleum and Natural Gas as nodal ministry.
- Eligible CGD entities will get 200 SCM of additional APM gas for each incremental billed domestic PNG connection above a GA specific threshold.
- The scheme will be implemented in two tranches over six months and aims to convert unbilled connections into billed connections.
- India currently has 1.74 crore domestic PNG connections, against a minimum work programme target of about 12.63 crore PNG connections by 2032 to 2034.
- The additional cheap gas will replace costlier LNG in the CNG transport segment, cutting payback period from about 10 years to about 3 years.
- PNGRB, constituted under the Petroleum and Natural Gas Regulatory Board Act, 2006 and based in New Delhi, regulates CGD networks across 307 Geographical Areas.
