India’s natural gas strategy is built around expansion rather than withdrawal. The country wants gas to replace more polluting fuels in industry, transport, household cooking, fertilizer production, and selected power applications. It has therefore invested in LNG terminals, long-distance pipelines, city gas distribution, and policies intended to increase domestic production.
The central difficulty is that infrastructure expansion does not automatically create affordable demand. India produces substantial volumes of natural gas, but domestic output is not sufficient to support the government’s larger market ambitions. Imported LNG fills the gap, exposing consumers to international prices and competition from wealthier Asian and European buyers.
India is consequently building a gas market while still deciding how large that market can become. The outcome will depend less on geological potential alone than on delivered prices, pipeline access, domestic allocation rules, and the ability of industries to switch away from coal, oil products, and other fuels.
India Is Building the Market Beyond Its Traditional Gas Regions
India’s gas industry developed around a limited number of producing and consuming regions. Western India gained early access through offshore production, processing plants, fertilizer facilities, refineries, petrochemical complexes, and the first major LNG terminals. Gujarat became the country’s most mature gas market because supply, pipelines, ports, and industrial demand developed together.
Other regions remained less connected. Consumers in northern, eastern, central, and southern India often lacked access to the transmission network or faced higher transportation costs. This restricted gas use even where industries or cities had potential demand.
The national strategy is designed to change that geography. New trunk pipelines are connecting domestic fields, LNG terminals, fertilizer plants, refineries, industrial areas, and city gas networks. The government’s “One Nation, One Gas Grid” program seeks to turn separate regional systems into a more integrated national market.
By June 2025, the Petroleum and Natural Gas Regulatory Board had authorized approximately 34,233 kilometers of natural gas pipelines. Around 25,429 kilometers were operational, while more than 10,000 kilometers remained under construction or in other stages of development.
The network is particularly important for eastern and northeastern India. Projects such as the Jagdishpur–Haldia and Bokaro–Dhamra pipeline system help move gas toward states that historically depended more heavily on coal and petroleum products. Connections to the Dhamra LNG terminal also give eastern consumers access to imported supply without moving gas across the entire country from the west coast.
Domestic Production Provides a Base but Not Enough Growth
Indian natural gas comes from offshore and onshore fields operated by public- and private-sector producers. The western offshore region has long been important to national supply, while production also comes from the Krishna-Godavari Basin, Assam, Tripura, Rajasthan, Gujarat, Tamil Nadu, and coalbed methane developments in eastern and central India.
Oil and Natural Gas Corporation remains the country’s largest producer, joined by Oil India and private or joint-venture operators such as Reliance Industries and bp. Deepwater production from the Krishna-Godavari Basin has helped support domestic availability, while new projects are intended to offset declines from mature fields.
Domestic gas receives different pricing and marketing treatment depending on the type of field and the policy under which it was developed. Gas from older regulated fields may be priced differently from output produced in deepwater, ultra-deepwater, high-pressure, high-temperature, or coalbed methane areas. The government has offered greater pricing freedom and fiscal incentives for more technically difficult resources.
These measures recognize that India’s easiest gas resources are not sufficient to deliver the desired growth. Deepwater projects require large investment, specialized technology, and long development periods. Mature fields need enhanced recovery work simply to limit decline. Exploration success can improve the supply position, but domestic production is unlikely to remove the need for LNG.
The allocation of lower-priced domestic gas is also politically important. Household piped gas and compressed natural gas for transport have received priority because sharp price increases directly affect urban consumers and public mobility. Fertilizer production is another strategic use because fertilizer prices and subsidies are linked to food security. This leaves some industrial and power consumers more exposed to market-priced gas and LNG.
LNG Connects India to Supply but Also to Global Price Volatility
India’s LNG terminals are the main bridge between domestic gas ambitions and available supply. The largest is Petronet LNG’s Dahej terminal in Gujarat, which has a nominal capacity of 17.5 million tonnes per year and operates as the principal entry point for imported gas. Other terminals include Hazira, Mundra, Dabhol, Kochi, Ennore, and Dhamra, along with newer or proposed projects intended to expand regional access.
The location and connectivity of a terminal are as important as its nameplate capacity. Dahej benefits from proximity to Gujarat’s industrial market and from strong pipeline connections. Kochi has historically operated below its potential because pipeline development toward larger inland markets was delayed. Dhamra and Ennore are strategically valuable because they reduce the east coast’s dependence on gas transported from western terminals.
Indian companies purchase LNG through a combination of long-term contracts and spot-market cargoes. Long-term arrangements can provide greater supply stability, while spot purchases allow buyers to respond to short-term demand and attractive prices. Neither method removes price exposure. Contract prices are often connected to oil or gas-market benchmarks, and spot cargoes can become expensive when global supply is tight.
This price sensitivity was clear during the international gas crisis of 2021–2023. Some Indian buyers reduced spot purchases when LNG prices rose beyond levels that power generators and industrial consumers could absorb. Cargoes could instead move toward European buyers willing to pay more to replace Russian gas.
India may benefit from the large volume of new LNG export capacity expected from the United States, Qatar, and other suppliers. A better-supplied global market could improve affordability later in the decade. However, LNG will continue to compete with coal, petroleum products, and renewable electricity in a market where fuel cost often determines whether customers switch.
City Gas Distribution Is Turning Gas Into a Consumer Market
City gas distribution is one of the fastest-expanding parts of India’s gas sector. Licensed operators build local pipeline networks that supply piped natural gas to households, businesses, and industries while operating compressed natural gas stations for vehicles.
By September 2025, city gas coverage had expanded to 307 geographical areas. India had approximately 15.7 million domestic piped-gas connections and more than 8,400 CNG stations. The geographic reach of authorized networks now extends well beyond older gas markets such as Delhi, Mumbai, and Gujarat.
Companies including Indraprastha Gas, Mahanagar Gas, Gujarat Gas, Adani Total Gas, GAIL Gas, and Indian Oil–Adani Gas operate major networks. Their markets differ considerably. Dense metropolitan areas can support large volumes of vehicle and household demand, while newer geographical areas may require years of pipeline construction and customer conversion before they reach commercial scale.
CNG has gained a strong position in taxis, buses, auto-rickshaws, and private vehicles in several cities. It can reduce local emissions compared with diesel and gasoline, although its price advantage changes with gas costs and fuel taxation. Household PNG offers continuous supply without cylinder delivery, but network construction is more practical in dense urban areas than in dispersed rural communities.
Industrial customers may ultimately provide greater volume than households. Small factories, commercial kitchens, ceramics producers, food processors, and other users can switch from fuel oil, diesel, LPG, petcoke, or coal when pipeline gas is available at a competitive price. The city gas network therefore serves both consumer energy access and industrial fuel conversion.
Fertilizer Demand Is Stable, While Power Demand Remains Price Sensitive
Fertilizer production forms a dependable base for Indian gas demand. Natural gas is used as both an energy source and a feedstock for ammonia and urea. Domestic fertilizer plants support agricultural policy, but their gas use also creates a connection between international LNG prices, government subsidy costs, and food production.
Refineries, petrochemical facilities, and other industries provide another major source of demand. Many of these consumers need continuous energy and value the operational advantages of gas. Their willingness to use more gas depends on whether it is competitive with alternative fuels.
Gas-fired power plants present the largest unrealized market. India has substantial gas-based generating capacity, but many plants operate at low load factors because imported LNG is often too expensive to compete with domestic coal and low-cost renewable electricity. Gas plants can provide flexible generation, but the power market does not always compensate them sufficiently for operating in a balancing role.
Government measures have attempted to improve LNG access for power generators, including pipeline expansion, import freedom, and customs treatment for LNG used in qualifying electricity generation. Even so, the basic commercial problem remains. Gas-fired electricity will struggle to expand unless gas prices fall, power-market design rewards flexible capacity, or environmental rules increase the cost of more polluting generation.
The 15% Ambition Depends on Delivered Gas Prices
India has maintained a goal of increasing natural gas from roughly 6% of its primary energy mix toward 15%. The target reflects the idea that gas can provide a bridge between a coal- and oil-heavy system and a cleaner energy economy.
Infrastructure is no longer the only barrier. The unified pipeline tariff, introduced in 2023, has reduced some of the cost disadvantages faced by consumers located far from supply entry points. Around 90% of operational pipelines were covered by the regime by 2025. Pipeline construction and city gas licensing are also bringing more potential consumers within reach of the network.
The remaining question is whether sufficient gas can be delivered at prices Indian users will accept. Domestic production growth would improve affordability and reduce import dependence, but new fields may not expand quickly enough. LNG availability is increasing, but international supply does not guarantee a price competitive with Indian coal or renewable power.
Compressed biogas may gradually supplement conventional supply. India has introduced blending obligations for compressed biogas in CNG and PNG markets, allowing agricultural waste, organic material, and other feedstocks to enter existing gas networks. It will not replace large LNG or domestic production volumes in the near term, but it can support rural investment and reduce the carbon intensity of distributed gas use.
India’s natural gas market is therefore likely to grow unevenly. Fertilizer, city gas, refining, and selected industrial applications have strong policy or commercial foundations. Power generation and price-sensitive industry will expand only when supply is affordable. The pipelines, terminals, and distribution systems are creating the physical basis for a larger market, but delivered cost will determine how much of that capacity is ultimately used.
