Key Details
India already has 1.74 crore domestic PNG connections, but not every installed connection is actively consuming and billing gas. The new scheme seeks to change the commercial calculation for distributors by rewarding actual connection use rather than network construction alone.
Scheme Element | Provision |
|---|---|
Effective date | 1 September 2026 |
Eligible performance | Incremental billed domestic PNG connections above the threshold fixed for each geographical area |
Incentive | Additional allocation of 200 standard cubic metres of lower-priced domestic gas for every eligible connection |
Use of allocation | Replaces costlier imported LNG used by the distributor in its CNG transport business |
Implementation period | Two tranches spanning six months |
Expected financial effect | Reduction in the estimated payback period for household PNG investment from around 10 years to approximately 3 years |
The Incentive Starts When a Connection Begins Billing
The scheme rewards incremental billed connections, not simply pipelines laid or households technically connected. This addresses a key implementation gap: infrastructure may reach a building without the household activating the connection or beginning regular consumption.
Each City Gas Distribution (CGD) company will receive a threshold for its licensed geographical area. Only billed household connections added above that threshold during the performance period will qualify.
The incentive is intended to encourage distributors to:
activate existing but unbilled connections;
extend service into new neighbourhoods;
encourage households using LPG to switch; and
complete last-mile work needed to make installed networks operational.
Additional APM Gas Reduces the Distributor’s Overall Costs
For every eligible domestic connection, the distributor will receive 200 standard cubic metres (SCM) of domestically produced APM gas. This is not additional gas supplied to that household. Instead, it can substitute costlier liquefied natural gas currently procured for the distributor’s CNG transport segment.
The mechanism therefore works across the company’s gas portfolio:
More billed household connections → more lower-priced APM gas → lower overall sourcing costs → faster recovery of PNG network investment.
The Government expects this to reduce the payback period for domestic PNG investment from about 10 years to three years. This is an expected commercial effect, not a guaranteed outcome for every distributor or geographical area.
A Six-Month Window Prioritises Rapid Activation
The scheme will operate through two tranches over six months, giving distributors a relatively short period to exceed their assigned thresholds.
This could concentrate activity in areas where pipelines and connection infrastructure already exist but households have not begun billing. Its longer-term value will depend on whether newly activated households continue using PNG after the incentive period rather than retaining it as a secondary or minimally used connection.
Households Do Not Receive a Direct Subsidy
Households will not receive the 200 SCM allocation or a cash payment. The immediate financial benefit goes to qualifying CGD companies through lower gas-procurement costs.
The announcement also does not introduce a retail-price cap, mandatory tariff reduction or requirement that distributors pass the sourcing benefit directly to households. Consumer bills will therefore continue to depend on gas prices, taxes, consumption and applicable CGD charges.
Wider Measures Target Other Barriers to PNG Adoption
The incentive is accompanied by measures addressing other parts of the household PNG rollout:
an Accelerated Approval Framework and standardised right-of-way charges to speed infrastructure permissions;
encouragement to States to reduce VAT on natural gas to 5%;
National PNG Drive 2.0, including awareness campaigns, LPG-cylinder surrender facilities and conversion of housing societies; and
a unified portal for applications and connection tracking.
Together, these measures target infrastructure approvals, taxation, household switching and connection processing, while the new gas-allocation incentive specifically rewards conversion of network coverage into active billed connections.
What Are APM Gas and SCM?
APM gas is domestically produced natural gas supplied under the Government’s administered pricing framework, generally at a lower cost than imported LNG. SCM, or standard cubic metre, is a standard unit used to measure the volume of gas under specified temperature and pressure conditions.
Policy Relevance
The scheme introduces a more outcome-oriented measure of gas-network expansion: a connection counts only when it becomes billed. This is more meaningful than reporting pipelines laid or connection infrastructure installed, but it does not by itself establish sustained household use.
Three aspects will determine the scheme’s effectiveness:
Threshold design: area-specific baselines must distinguish genuine additional performance from connections that distributors were already expected to activate.
Persistence of use: monitoring should show whether incentivised households remain active after the six-month performance period.
Consumer transmission: separate data on retail prices and connection charges will be needed to determine whether lower sourcing costs eventually benefit households.
The scheme may be most effective in geographical areas with existing but underused networks. Locations that still lack pipelines, affordable last-mile infrastructure or municipal permissions may respond more slowly despite the incentive.
Follow the Full Update Here: PIB: Incentive Scheme for Promotion of Domestic PNG Connections