India will offer city gas distributors an additional 200 standard cubic metres (SCM) of lower-priced domestic natural gas for every new billed household piped-gas connection, stepping up incentives for companies to accelerate the switch from LPG to piped gas, according to The Hindu BusinessLine. The incentive, approved by the government and effective from September 1, applies to incremental domestic piped natural gas (PNG) connections above a threshold set for each geographical area.
Gas allocation incentive for city gas distributors
Under the scheme, eligible city gas distribution (CGD) companies will receive an additional 200 SCM of domestically produced APM (administered price mechanism) gas for every incremental billed domestic PNG connection achieved above the threshold set for their respective geographical area during the performance period, according to an official statement issued by the oil ministry. The programme will be implemented in two six-month tranches.
The additional allocation of domestically produced, lower-priced APM gas will allow eligible CGD companies to substitute some of the costlier LNG they currently procure for their CNG transport business, lowering their overall gas-sourcing costs.
Supply-side impact: APM gas swaps out LNG
The scheme is aimed at turning inactive, unbilled connections into working ones and expanding PNG networks into new areas, the ministry statement said. By directing additional cheap domestic APM gas into the CGD pool, the policy lets distributors replace a portion of the costlier liquefied natural gas (LNG) they procure for their compressed natural gas (CNG) transport business, reducing overall gas-sourcing costs. The savings are expected to cut the payback period on capital spending for domestic PNG connections to about three years from roughly 10 years, providing CGD companies with a stronger financial incentive to expand household connections, the government said.
Demand-side gains: PNG connections climb
India currently has about 17.4 million domestic PNG connections, according to the report. Since March, more than 5 lakh PNG connections have been gasified, while over 5.7 lakh customers have registered for new connections, according to government data. The government also required consumers with PNG connections to surrender their domestic LPG connections and launched a campaign to promote the shift to piped gas. The push to expand PNG gained momentum during the West Asia crisis earlier this year, when disruptions to LPG supplies prompted the government to seek ways to reduce dependence on cylinders, particularly in the commercial sector. The government describes PNG as a cleaner, safer and more convenient alternative to LPG cylinders and traditional cooking fuels.
| Metric | Figure |
|---|---|
| Existing domestic PNG connections | 17.4 million |
| PNG connections gasified since March | Over 5 lakh |
| New customer registrations | Over 5.7 lakh |
| Extra APM gas per incremental connection | 200 SCM |
| Payback period before scheme | Around 10 years |
| Payback period after scheme | About 3 years |
Regulatory push and PNG Drive 2.0
The government has also sought to reduce regulatory hurdles for gas infrastructure, standardise right-of-way charges and encourage states to lower VAT on natural gas to 5 per cent; several states have already reduced the tax, according to the statement. A nationwide PNG Drive 2.0 includes awareness campaigns, efforts to convert LPG-using housing societies and a facility for households to surrender LPG cylinders. A unified digital portal for applying for and tracking new PNG connections is also under development. The incentive scheme is intended to make household PNG expansion more financially attractive for CGD companies while encouraging more consumers to shift to piped cooking gas, the government added.
Sources:
