Centre Invokes Essential Commodities Act To Regulate Natural Gas Supply Amid West Asia Conflict
The Central Government has issued the Natural Gas (Supply Regulation) Order, 2026, invoking powers under the Essential Commodities Act, 1955, to regulate the production, supply and distribution of natural gas in the country following disruptions in global supplies caused by the ongoing conflict in the West Asia between US-Israel and Iran.
The order, notified by the Ministry of Petroleum and Natural Gas on March 9, states that the conflict has affected liquefied natural gas (LNG) shipments through the Strait of Hormuz, with suppliers invoking force majeure and diverting gas supplies to priority sectors.
The government said the regulation was necessary to ensure equitable distribution and continued availability of natural gas for critical sectors such as household consumption, transport and fertilizer production.
Priority Allocation Framework
Under the order, natural gas supply will be distributed across sectors according to a four-tier priority framework based on past consumption.
Priority Sector I, which will receive 100% of the average gas consumption of the past six months (subject to availability), includes:
Domestic piped natural gas (PNG) supply
Compressed natural gas (CNG) used for transport
LPG production, including shrinkage requirements
Pipeline compressor fuel and other essential pipeline operational needs
Priority Sector II covers fertilizer plants, which will receive 70% of their average gas consumption of the previous six months. The government has directed that the gas must be used strictly for fertilizer production, and units must furnish certification to the Petroleum Planning and Analysis Cell through the Ministry of Fertilizers confirming compliance.
Priority Sector III includes tea industries, manufacturing and other industrial consumers connected to the national gas grid. These sectors will be supplied 80% of their average consumption over the previous six months, subject to operational availability.
Priority Sector IV applies to industrial and commercial consumers supplied through City Gas Distribution (CGD) networks, who will also receive 80% of their previous six-month average consumption.
Supply Curtailment From Non-Priority Sectors
To meet the requirements of priority sectors, the government has ordered partial or full curtailment of gas supplies to certain industries.
Gas supplies may be diverted from:
Petrochemical facilities such as ONGC Petro additions Limited, GAIL's Pata petrochemical complex, and Reliance Industries Limited's oil-to-chemicals operations
Other high-pressure high-temperature gas consumers
Power plants, where required
Additionally, oil refining companies have been directed to absorb the impact of LNG supply disruptions by reducing their gas consumption to approximately 65% of their past six-month average, subject to operational feasibility.
Gas Pooling Mechanism
The order authorises GAIL, in coordination with the Petroleum Planning and Analysis Cell, to manage the diversion and redistribution of natural gas.
A pooled price will be determined for gas diverted from non-priority sectors to priority sectors. Entities receiving this gas must undertake that they accept the pooled price and will not challenge the force majeure mitigation supplies through litigation.
The order also bars the resale of diverted gas by recipient entities.
Binding Effect on Contracts
The government has clarified that the order will override existing Gas Sale Agreements and other commercial arrangements, meaning gas producers, marketers, pipeline operators and distribution companies must comply with revised supply schedules and allocation directions issued by the Centre.
Entities including Oil and Natural Gas Corporation, Reliance Industries Limited, Oil India Limited, Vedanta Limited, gas marketers, LNG terminal operators and city gas distributors have been directed to immediately implement the order.
The notification also refers to the Supreme Court's ruling in Association of Natural Gas v. Union of India (In re Special Reference No. 1 of 2001), which held that natural gas and LNG fall within the scope of petroleum and petroleum products, enabling regulation under the Essential Commodities Act.
The government stated that all entities involved in the production, import, transportation or marketing of natural gas must furnish information on production, imports, stocks, allocation and consumption to the authorised agency, namely the Petroleum Planning and Analysis Cell.