Government of India Issues Natural Gas (Supply Regulation) Order, 2026 to Ensure Equitable Distribution Amid Middle East Crisis

“Indirect Tax I Indirect Tax Litigation I Customs & FTP I Central Licensing I Arbitration I Advisory”

Dated: 10.03.2026

Government of India Issues Natural Gas (Supply Regulation) Order, 2026 to Ensure Equitable Distribution Amid Middle East Crisis

The Ministry of Petroleum and Natural Gas, Government of India, has issued the Natural Gas (Supply Regulation) Order, 2026, in response to the ongoing disruption of liquefied natural gas (LNG) shipments through the Strait of Hormuz due to the Middle East conflict. This order, published on March 9, 2026, aims to ensure the equitable distribution and continued availability of natural gas to priority sectors in the country.

Background of the Order

The disruption in LNG shipments has led suppliers to invoke the force majeure clause, necessitating the diversion of natural gas to priority sectors. The Supreme Court of India, in its judgment in the case of Association of Natural Gas and others v. Union of India, has clarified that natural gas and liquefied natural gas fall under the purview of petroleum and petroleum products. These commodities are covered under Entry 5 of the Schedule of the Essential Commodities Act, 1955, which empowers the Central Government to regulate their supply and distribution to ensure equitable access.

Key Provisions of the Order 

The Natural Gas (Supply Regulation) Order, 2026, outlines the following measures:

1. Priority Sector Allocation 

The order categorizes natural gas consumers into four priority sectors, with specific allocation percentages based on their past six-month average consumption:

Priority Sector I:
- Domestic Piped Natural Gas (PNG) supply
- Compressed Natural Gas (CNG) for transport
- LPG production, including shrinkage requirements
- Pipeline compressor fuel and other essential pipeline operations Allocation: 100% of past six-month average consumption, subject to operational availability.
Priority Sector II:
- Fertilizer plants Allocation: 70% of past six-month average consumption, subject to operational availability. Gas supply must be used exclusively for fertilizer production, and units must provide certification to the Petroleum Planning and Analysis Cell (PPAC).
Priority Sector III:
- Tea industries, manufacturing, and other industrial consumers supplied through the national gas grid Allocation: 80% of past six-month average consumption, subject to operational availability. Allocation principles will be developed by the PPAC in coordination with the Industry Committee.
Priority Sector IV:
- Industrial and commercial consumers supplied through City Gas Distribution (CGD) networks Allocation: 80% of past six-month average consumption, subject to operational availability. Allocation principles will be developed by the PPAC in coordination with the Industry Committee.

2. Gas Redistribution

To meet the needs of priority sectors, the order mandates the curtailment of gas supplies to non-priority sectors in the following order:

Petrochemical facilities, including ONGC Petro Additions Limited, GAIL Pata Petrochemical Complex, Reliance O2C, and other High-Pressure High-Temperature (HPHT) gas consumers.
Power plants, as required. Additionally, oil refining companies are directed to reduce gas allocation to refineries to approximately 65% of their past six-month average consumption, subject to operational feasibility.

3. Implementation Mechanism

The Gas Authority of India Limited (GAIL), in coordination with the PPAC, will manage the supply of natural gas to implement the order. Key measures include:

Submission of invoice prices for diverted natural gas volumes to the PPAC.
Notification of a pooled price for natural gas diverted from non-priority sectors to priority sectors.
Priority sector entities must accept the pooled price and provide an undertaking not to resell the diverted natural gas.

4. Compliance and Reporting 

All entities involved in the production, import, marketing, transportation, or supply of natural gas—including ONGC, RIL, OIL, Vedanta, GAIL, LNG terminal operators, and CGD entities—are required to comply with the order. They must revise supply schedules, divert supplies, and allocate natural gas as directed by the Central Government in coordination with GAIL. Additionally, these entities must furnish information on production, imports, stocks, allocation, supply, and consumption to the Central Government or the PPAC.

5. Overriding Existing Contracts 

The provisions of this order will override any inconsistent terms in existing Gas Sale Agreements (GSAs) and other commercial arrangements.

Impact of the Order

The Natural Gas (Supply Regulation) Order, 2026, is a critical step by the Indian government to address the challenges posed by the disruption in LNG supplies. By prioritizing essential sectors such as domestic PNG, CNG for transport, fertilizer production, and industrial activities, the government aims to mitigate the impact of the crisis on the economy and ensure uninterrupted access to natural gas for vital operations.

Conclusion

The Natural Gas (Supply Regulation) Order, 2026, underscores the government’s commitment to maintaining energy security and ensuring equitable distribution of resources during times of crisis. By implementing a structured allocation mechanism and overriding existing contractual arrangements, the order seeks to balance the needs of priority sectors while addressing the challenges posed by global disruptions. This proactive approach highlights the importance of natural gas as a critical resource for India’s economic and industrial growth.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

We offer Legal advice and litigation support in matters related to Indirect Tax-Customs, FTP, other Indirect Tax matters & Arbitration law, all sorts of Central licensing and related matters. Come and explore the new way of doing business with us!

Source: Ministry of Petroleum and Natural Gas, Government of India

Disclaimer

Handy Download:

Natural Gas (Supply Regulation) Order- 2026Download

Connect with us for more-

@ Team S J EXIM SERVICES, New Delhi, IN

CP: Ms. Shubhra Jha, Founder

Tel: +91-11-4999 2707 I +91-9999005693

Web: www.sjexim.services

EMAIL: operations@sjexim.services I shubhra@sjexim.services

Facebook: www.facebook.com/sjeximservices

LinkedIn: https://www.linkedin.com/company/90794255/admin/feed/posts/