New Delhi: The Ministry of Petroleum and Natural Gas has approved an incentive scheme for domestic PNG connections, taking effect on 1 September.
Currently, India has 1.74 crore domestic Piped Natural Gas (PNG) connections. The new framework incentivises City Gas Distribution (CGD) companies to convert unbilled connections into active, billed lines. Furthermore, the initiative encourages CGD entities to expand network coverage into unserved residential areas.
[Incremental Domestic PNG Connection] ──▶ 200 SCM Additional APM Gas Allocation
│
[3-Year Capex Payback Period] ◀──( Displaces Costlier Imported LNG )
Additional APM Gas to Reduce Sourcing Costs
Under the performance framework, eligible CGD entities will receive an additional 200 Standard Cubic Metres (SCM) of lower-priced Administrative Price Mechanism (APM) gas for every incremental billed connection achieved above set thresholds.
The scheme will operate in two tranches over a six-month performance period.
Key Operational Highlights of the PNG Incentive Scheme:
Domestic APM Allocation: Grants 200 SCM of low-cost gas per incremental billed connection.
LNG Displacement: Replaces costly imported LNG in the CNG transport segment to lower sourcing costs.
Capital Payback Reduction: Cuts payback period on domestic PNG capital expenditure from 10 years to roughly 3 years.
Nationwide PNG Network: Expands coverage beyond the current 1.74 crore domestic connections.
Regulatory Reforms and Infrastructure Upgrades
Significantly, the scheme builds upon recently implemented regulatory and tax measures.
[NATIONAL PNG INFRASTRUCTURE DRIVE 2.0]
┌────────────────────────────────┼────────────────────────────────┐
▼ ▼ ▼
[Accelerated Approval Framework] [Single-Window Registration] [State VAT Reduction to 5%]
Standardised RoW Charges Issued Unified Online Portal Launch Encouraged Across All States
The ministry introduced an Accelerated Approval Framework and standardised Right-of-Way (RoW) charges under the Natural Gas & Petroleum Distribution Order, 2026. Simultaneously, the Centre is urging states to cap Value Added Tax (VAT) on natural gas at 5 per cent.
Furthermore, the government is launching National PNG Drive 2.0 alongside a unified single-window registration portal. Piped natural gas offers distinct safety and cost advantages over LPG cylinders. Because PNG is lighter than air and supplied at low pressure, it disperses quickly during leaks and provides uninterrupted supply to high-rise urban households.
PNG Incentive Scheme Framework Overview
| Policy Provision | Previous Framework Baseline | New Incentive Scheme Provision | Core Impact on Energy Sector |
| Incentive Allocation | Standard APM quotas | 200 SCM extra APM gas per connection | Lowers overall gas-sourcing costs for CGD firms. |
| Capex Payback Timeline | ~10-Year capital recovery period | Reduced to approximately 3 years | Accelerates private investment in gas pipelines. |
| PNG Registration System | Fragmented regional portals | Unified single-window portal | Simplifies consumer application and connection tracking. |
| State Tax Alignment | Varied state-level VAT rates | 5% Target VAT rate | Reduces end-consumer pricing across participating states. |
About the Author
