Centre Invokes Essential Commodities Act to Regulate Natural Gas Supply Amid West Asia Conflict

The Central Government has invoked powers under the Essential Commodities Act, 1955 to regulate the production, supply and distribution of natural gas across the country in response to disruptions in global gas shipments caused by the ongoing conflict in West Asia.

Through a notification issued on March 9, 2026, the Ministry of Petroleum and Natural Gas introduced the Natural Gas (Supply Regulation) Order, 2026. The order aims to ensure equitable distribution of natural gas and safeguard supplies for critical sectors such as households, transport and fertilizer production.

Background: Disruptions Due to West Asia Conflict

The decision comes at a time when tensions in West Asia involving the United States, Israel and Iran have affected global energy supply chains. A key concern has been the disruption of liquefied natural gas (LNG) shipments passing through the Strait of Hormuz, a major global energy transit route.

Several international suppliers have reportedly invoked force majeure, allowing them to suspend or alter contractual obligations due to extraordinary circumstances. As a result, LNG shipments have been diverted or delayed, raising concerns about domestic gas availability in India.

To address this situation and prevent shortages in essential sectors, the government has exercised regulatory powers under the Essential Commodities Act.

Priority-Based Allocation of Natural Gas

The Natural Gas (Supply Regulation) Order establishes a four-tier priority framework for allocating gas across sectors. The allocation is based on the average consumption of the previous six months, ensuring that essential sectors continue to receive adequate supplies.

Priority Sector I – Highest Priority

The first category includes sectors considered critical for public welfare and national infrastructure. These sectors will receive 100% of their average natural gas consumption from the past six months, subject to availability.

The sectors in Priority I include:

• Domestic piped natural gas (PNG) supply
• Compressed natural gas (CNG) used for transport
• LPG production, including shrinkage requirements
• Pipeline compressor fuel and operational requirements

These uses are directly linked to household energy needs, public transport and essential pipeline infrastructure.

Priority Sector II – Fertilizer Production

The second priority category consists of fertilizer manufacturing plants, which play a crucial role in agricultural productivity and food security.

Under the new order, these plants will receive 70% of their average gas consumption over the previous six months.

To ensure compliance, fertilizer units must certify that the gas received is used strictly for fertilizer production. The certification must be submitted to the Petroleum Planning and Analysis Cell (PPAC) through the Ministry of Fertilizers.

Priority Sector III – Industrial Consumers on National Gas Grid

The third category includes industries connected to the national gas grid, such as:

• Tea industries
• Manufacturing units
• Other industrial consumers

These sectors will receive 80% of their average gas consumption over the previous six months, subject to operational availability.

Priority Sector IV – Commercial and Industrial CGD Consumers

The fourth category applies to industrial and commercial consumers supplied through City Gas Distribution (CGD) networks.

Like the third category, these consumers will receive 80% of their previous six-month average consumption.

Curtailment of Gas Supplies to Certain Industries

To ensure that priority sectors continue to receive adequate supplies, the government has authorised partial or complete curtailment of gas supply to certain non-priority industries.

Gas may be diverted from:

• Petrochemical facilities such as ONGC Petro Additions Limited
• GAIL’s Pata petrochemical complex
• Reliance Industries Limited’s oil-to-chemicals operations
• Other high-pressure and high-temperature gas consumers
• Certain power plants, depending on operational requirements

This diversion mechanism is intended to maintain stable supply for sectors that have a direct impact on households, transport and agriculture.

Gas Consumption Limits for Oil Refineries

The order also directs oil refining companies to reduce their gas consumption to approximately 65% of their average usage over the previous six months, subject to operational feasibility.

This measure aims to absorb part of the shock caused by LNG supply disruptions while preserving supplies for critical sectors.

Gas Pooling Mechanism Introduced

To manage the redistribution of natural gas effectively, the government has authorised GAIL (India) Limited, in coordination with the Petroleum Planning and Analysis Cell, to oversee the diversion and reallocation of gas.

A pooled pricing mechanism will be introduced for gas diverted from non-priority sectors to priority sectors. Under this system:

• A common price will be calculated for pooled gas supplies.
• Entities receiving the diverted gas must accept the pooled price.
• Recipients must undertake that they will not challenge force majeure mitigation supplies through litigation.

Additionally, the order prohibits the resale of diverted gas by entities receiving these supplies.

Government Order Overrides Existing Contracts

The notification makes it clear that the new order will override existing Gas Sale Agreements and other commercial contracts.

This means that all stakeholders involved in the gas supply chain must comply with revised allocation schedules issued by the government.

Entities directed to implement the order include:

• Oil and Natural Gas Corporation (ONGC)
• Reliance Industries Limited
• Oil India Limited
• Vedanta Limited
• Gas marketers
• LNG terminal operators
• Pipeline operators
• City gas distributors

These entities must immediately implement the supply adjustments mandated by the government.

Supreme Court Precedent on Regulation of Natural Gas

The government’s action is supported by a ruling of the Supreme Court in Association of Natural Gas v. Union of India (In re Special Reference No. 1 of 2001).

In that case, the Supreme Court held that natural gas and liquefied natural gas fall within the scope of petroleum and petroleum products, thereby allowing the government to regulate them under the Essential Commodities Act.

The reference to this judgment strengthens the legal basis for the government’s decision to intervene in the natural gas market during the current supply disruption.

Reporting Obligations for Gas Entities

The order also introduces stricter reporting and disclosure requirements.

All entities involved in the production, import, transportation or marketing of natural gas must provide detailed information regarding:

• Production levels
• Imports
• Stock positions
• Allocation patterns
• Consumption data

This information must be submitted to the Petroleum Planning and Analysis Cell, which has been designated as the authorised agency for monitoring and coordination.

Objective: Preventing Supply Shock

The government has clarified that the primary objective of the regulation is to ensure equitable distribution and uninterrupted availability of natural gas, particularly for sectors that are vital to daily life and economic stability.

By prioritising household energy, transport fuel and fertilizer production, the order seeks to shield essential sectors from the immediate impact of global supply disruptions triggered by the geopolitical conflict in West Asia.

The Natural Gas (Supply Regulation) Order, 2026 is expected to remain in force for the duration of the supply disruption, with further adjustments possible depending on the evolving global energy situation.