Natural Gas Supply Order 2026: Priority Rules, Impact

Why the 2026 gas order matters now

The government has issued the Natural Gas (Supply Regulation) Order, 2026, creating a priority-based allocation framework to manage India’s gas pool amid supply uncertainty linked to the West Asia conflict. Nomura expects the impact to vary across city gas distributors (CGDs) and oil refiners because the order ring-fences some end-uses but permits curtailments elsewhere. The framework is designed to keep household and transport use protected, while placing the burden of supply cuts on sectors that can potentially switch fuels or reduce consumption. The order also introduces stricter governance, including a ban on reselling or diverting allocated gas.

From an equity market lens, the key question is how much volume risk shifts to industrial consumers, refiners, and other large users, and how that flows through to companies with different customer mixes. Nomura’s note highlights that CGDs with heavier industrial and commercial exposure are more vulnerable than those dominated by CNG and domestic PNG.

What the Natural Gas (Supply Regulation) Order, 2026 says

The order establishes a priority-based allocation mechanism, with supply to four sectors prioritised based on their average consumption over the past six months. In practice, this anchors allocations to a recent baseline and makes cuts more rule-based when shortages occur. The framework also clarifies which segments are intended to be protected in a disruption scenario.

A central feature is that certain sectors receive full coverage of their recent average consumption, while others receive partial supply “subject to availability”. Alongside this, the government retains the ability to apply partial or full curtailments to a set of sectors in a specified sequence.

Priority sectors and allocation levels

Under the mandate, supplies to four priority sectors are defined as follows.

This design makes the policy intent explicit: domestic PNG and CNG are fully protected, while industrial and commercial consumption faces controlled reductions depending on availability.

Curtailment sequence and restrictions on diversion

To meet the priority allocations, the government may implement partial or full supply curtailments in the following order:

• Petrochemical facilities
• Power plants
• Refineries (capped at 65% allocation)

The order also strictly prohibits any entity from reselling or diverting allocated gas. For regulated allocations, this clause is important because it aims to prevent arbitrage and ensure that protected categories, such as domestic PNG and CNG, are not indirectly compromised through downstream diversion.

Nomura’s view: savings, assumptions, and where cuts land

Nomura describes the prioritisation as a step in the right direction, mainly because it protects domestic PNG and CNG vehicle customers, which it calls the most vulnerable group with limited alternatives compared with industrial and commercial customers. Based on the revised allocation framework, Nomura estimates 31% overall gas savings. The brokerage also assumes 100% curtailment for the power and petrochem segments, indicating these segments are likely to absorb the bulk of the supply disruption.

Nomura estimates overall volume saving of 59 mmscmd, which it notes is in line with 55-60 mmscmd of India’s total gas sourcing from West Asia in 2025. The linkage is important because it frames the order as a framework intended to match a disruption magnitude of the same order as the West Asia-linked sourcing exposure referenced by the brokerage.

CGDs: MGL and IGL less vulnerable than Gujarat Gas

Nomura differentiates among listed CGDs based on industrial and commercial (I/C) exposure within total volume. It says Mahanagar Gas (MGL) and Indraprastha Gas (IGL) are less vulnerable compared with Gujarat Gas, given their lower I/C mix. For MGL and IGL, only 16% and 13% of total volume, respectively, is distributed to I/C segments. Nomura estimates that a 20% curtailment to these I/C segments would result in an overall volume impact of about 3% for both.

By contrast, Gujarat Gas has 49% of its volume distributed to I/C consumers. On Nomura’s assumptions, that translates into a much higher estimated volume impact of about 10%.

LPG production and GAIL’s allocation benefit

The order explicitly includes LPG production within Priority Sector I. Nomura notes that GAIL will benefit from 100% gas allocation to its LPG plants under this category. In a constrained supply scenario, the inclusion of LPG production in the fully protected bucket can reduce volume uncertainty for those specific plants relative to end-uses that sit lower in the curtailment stack.

How much CGD supply is actually exposed under Nomura’s framework

Nomura’s modelling suggests the CGD segment impact remains limited at an aggregate level because CNG and domestic PNG are fully protected. It estimates that only 35% of CGD supplies, which are the industrial and commercial consumers, face a 20% cut. This framing is consistent with the policy’s structure, where Priority Sector IV retains 80% supply based on the six-month average, but still carries cut risk when availability tightens.

Gujarat Gas restructuring: MCA-directed technical revisions

Separately, Gujarat Gas has disclosed revisions to its Composite Scheme of Arrangement and Amalgamation following directions from the Ministry of Corporate Affairs (MCA). The company said the revisions, affecting Clauses 60 and 63, relate to re-allocation of authorised share capital from Gujarat Gas to GSPL Transmission Limited (GTL) upon demerger. Gujarat Gas characterised these changes as technical and stated they do not materially impact the approved scheme or shareholder rights, and that shareholders’ rights, interests, or entitlements remain unaffected.

The announcement was made on January 23, 2026, and the revised scheme and the MCA letter were uploaded on the company’s website.

The broader scheme: mergers, demerger, and regulatory pathway

The scheme merges Gujarat State Petroleum Corporation (GSPC), Gujarat State Petronet (GSPL), and GSPC Energy Limited (GEL) into Gujarat Gas (GGL), and demerges the gas transmission business into GTL. The restructuring by-passed conventional National Company Law Tribunal approval under Sections 230-232 of the Companies Act, and instead relied on a notification dated 13 June 2017 issued under Section 462, under which approval for eligible government-company arrangements is sought directly from the Central Government.

Accordingly, the MCA issued an order on September 10, 2025 to convene shareholder meetings and allow the scheme to proceed. The material also notes that the merger and demerger comply with the Petroleum and Natural Gas Regulatory Board Act, 2006, with GGL retaining CGD and trading authorisations, while GSPL’s transmission licences shift to GTL with PNGRB approval.

The Competition (Criteria for Exemption of Combinations) Rules, 2024 are also referenced, with Item 10 waiving CCI approval for intra-group mergers without change in control. Before the deal, the Gujarat Government held 95% voting rights in GSPC, and after the restructuring it retained 55.07% in GGL and the right to appoint a board majority, which was cited as the basis for exemption due to unchanged control.

Key data points investors are tracking

Market impact and what to watch next

For CGDs, the order’s immediate market relevance is the split between fully protected demand (domestic PNG and CNG) and partially protected industrial and commercial demand. Nomura’s company-level sensitivity indicates that firms with lower I/C exposure may see limited volume impact under a 20% I/C cut assumption, while CGDs with higher I/C exposure may see a larger effect.

For refiners, the order explicitly places them behind petrochem and power in the curtailment order, while also capping refinery allocation at 65% under curtailment conditions. For LPG-linked gas consumption, Priority Sector I protection is a supportive factor, and Nomura specifically flags GAIL’s LPG plants as beneficiaries due to 100% allocation.

On Gujarat Gas, the January 2026 disclosure focuses on technical revisions to the scheme’s clauses relating to authorised share capital re-allocation to GTL upon demerger, with the company stating there is no material impact on shareholder rights. The next concrete milestone cited in company communication is the final MCA hearing scheduled for February 18, 2026.

Conclusion

The Natural Gas (Supply Regulation) Order, 2026 formalises a priority allocation model that fully protects domestic PNG and CNG while pushing most curtailment risk toward petrochem, power, and then refiners, with industrial demand facing partial cuts. Nomura’s estimates suggest limited aggregate CGD impact, but meaningful differences at the company level driven by industrial and commercial exposure. In parallel, Gujarat Gas has disclosed MCA-directed technical revisions to its restructuring scheme, ahead of the final MCA hearing scheduled for February 18, 2026.