Government revises LPG allocation formula, links supply to reforms and promotes transition to natural gas
April 8, 2026: Following the ceasefire between the United States and Iran, the Centre has introduced a major overhaul in LPG distribution to address supply concerns and improve efficiency. The revised policy focuses on balancing demand across sectors while prioritising supply for areas where alternatives like natural gas are not feasible. The move signals a shift towards a more regulated and reform-driven fuel distribution system.
Under the new framework, 70 per cent of packed non-domestic LPG has been allocated to states, with an additional 10 per cent reserved for those advancing piped natural gas (PNG) infrastructure. Industrial LPG consumption has been capped at 70 per cent of pre-March 2026 levels across multiple sectors. The policy aims to ensure fair distribution while encouraging industries to transition towards cleaner fuel options such as natural gas.
To streamline usage, the government has imposed a daily industrial supply cap of 0.2 TMT, prioritising units where LPG cannot be substituted. Industries must also register with oil marketing companies and apply for PNG connections, unless technically unfeasible. States have been directed to implement gas distribution orders, utilise reform-linked quotas, and roll out compressed biogas policies, marking a broader push towards a gas-based economy.