Incentive Scheme for Promotion of Domestic PNG Connections

Recently, the Government of India, approved the Incentive Scheme for Promotion of Domestic PNG Connections to accelerate the adoption of Piped Natural Gas (PNG) as a household cooking fuel. Effective from 1 September 2026, the scheme seeks to increase active domestic PNG connections by encouraging City Gas Distribution (CGD) entities to activate existing connections and expand PNG networks to new residential areas.

About the Incentive Scheme for Promotion of Domestic PNG Connections

The Incentive Scheme for Promotion of Domestic PNG Connections, formally called the Administered Price Mechanism/Non-Administered Price Mechanism (APM/NAPM) Incentive Scheme for Promotion of Domestic PNG Connections, incentivises City Gas Distribution (CGD) entities to increase active and billed household PNG connections by providing additional lower-priced domestic gas. Approved by the Ministry of Petroleum and Natural Gas, it will take effect from 1 September 2026.

Why was the Incentive Scheme introduced?

India has around 1.74 crore domestic PNG connections, but the challenge is to ensure that these connections are active and billed while extending the network to households that are not yet connected. At the same time, PNG infrastructure requires significant upfront investment, making expansion into new areas financially challenging for CGD entities.

The scheme addresses these gaps by linking the incentive to actual growth in billed domestic PNG connections.

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How does the Incentive Scheme for Promotion of Domestic PNG Connections work?

The Incentive Scheme for Promotion of Domestic PNG Connections rewards CGD entities for increasing the number of active and billed household PNG connections.

• A threshold level is fixed for each Geographical Area (GA).
• When a CGD entity achieves billed domestic PNG connections above this threshold, it becomes eligible for the incentive.
• For every additional billed connection, the CGD entity receives 200 Standard Cubic Metres (SCM) of lower-priced, domestically produced gas.
• This gas can replace some of the costlier imported Liquefied Natural Gas (LNG) used by CGD entities for their Compressed Natural Gas (CNG) transport segment.
• This reduces the company’s overall gas cost and shortens the payback period for domestic PNG investments from around 10 years to about 3 years.
• As a result, CGD entities get a stronger financial incentive to activate existing connections and connect more households to PNG.

Government Measures Supporting the Incentive Scheme for Promotion of Domestic PNG Connections

The Incentive Scheme for Promotion of Domestic PNG Connections is supported by complementary measures that address approval delays, pipeline construction, taxation and consumer onboarding.

• The Accelerated Approval Framework aims to speed up approvals for PNG infrastructure by ensuring that applications are processed within defined timelines.
• Standardised Right-of-Way (RoW) charges bring greater uniformity in the charges paid by CGD entities for laying PNG pipelines, making network expansion easier.
• States are being encouraged to reduce Value Added Tax (VAT) on natural gas to 5%, which can lower the cost of PNG for households and encourage greater adoption.
• National PNG Drive 2.0 promotes the shift to PNG through awareness campaigns, household notices, LPG-cylinder surrender facilities and conversion of LPG-using housing societies.
• A Unified PNG registration portal is being developed as a single-window platform through which households can apply for a PNG connection and track their application.

Significance

The Incentive Scheme for Promotion of Domestic PNG Connections is significant because it improves the commercial viability of household PNG expansion while supporting cleaner and more secure energy use.

• Improves the utilisation of existing infrastructure by converting unbilled or inactive connections into active household connections.
• Accelerates PNG network expansion by making new household connections more financially viable for CGD entities.
• Reduces dependence on imported LNG by encouraging greater use of domestically produced gas.
• Supports cleaner cooking by expanding access to a cleaner-burning household fuel.
• Strengthens energy security by increasing the role of natural gas in India’s household energy mix.
• Provides a reliable fuel supply through continuous pipeline-based distribution, reducing dependence on LPG cylinder deliveries.

Challenges

The scheme improves the economics of PNG distribution, but several barriers could still limit its wider adoption.

• High upfront investment in pipelines and last-mile connectivity can make expansion difficult in areas with low household density.
• Unequal commercial viability may encourage CGD entities to prioritise densely populated urban areas over less profitable regions.
• Household affordability may be affected by connection charges, gas prices and State-level taxation.
• Delays in Right-of-Way permissions and local approvals can slow pipeline construction and network expansion.
• Regular consumer usage remains essential because installing a connection alone does not ensure sustained PNG consumption.