Centre Introduces New LPG Allocation Formula, Priority to Key Industries Like Pharma, Agriculture

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The Ministry of Petroleum and Natural Gas has announced a new LPG allocation formula aimed at supporting critical sectors of the economy, including pharma, food, and agriculture.

Priority Supply to Key Sectors

Under the revised policy:

  • Bulk LPG will be supplied to sectors such as
    • Pharma
    • Food processing
    • Agriculture
    • Steel, ceramics, glass, packaging, and more

These industries will receive:

  • Up to 70% of their pre-March 2026 LPG consumption
  • Subject to an overall cap of 0.2 TMT (thousand metric tonnes) per day

Preference for Non-Substitutable Usage

The government clarified:

  • Industries where LPG cannot be replaced by natural gas will get priority
  • This ensures continuity in essential manufacturing processes

Mandatory Registration & PNG Transition

Industries must:

  • Register with Oil Marketing Companies (OMCs)
  • Apply for Piped Natural Gas connections via city gas distributors

However:

  • Units where LPG is technically irreplaceable are exempt from PNG requirements

Incentives for States

States have already received:

  • 70% allocation of packed non-domestic LPG

Additionally:

  • 10% extra allocation will be given to states implementing PNG-related reforms

Three Key Directives to States

The Centre has asked states to:

  1. Implement the Natural Gas & Petroleum Products Distribution Order, 2026
  2. Utilise the reform-linked 10% LPG allocation
  3. Notify policies related to Compressed Bio Gas (CBG)

Surge in Demand for Small Cylinders

The ministry also reported a sharp rise in demand:

  • Over 7.8 lakh 5-kg LPG cylinders sold since March 23
  • More than 1.06 lakh cylinders sold in a single day recently
  • Around 1,300 awareness camps conducted by oil companies

Aim: Stability Amid Global Challenges

The move comes amid global supply uncertainties and aims to:

  • Ensure steady LPG availability
  • Support critical industries
  • Encourage transition to cleaner fuels like PNG and CBG

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