India's Gas Market Has a New #1: City Gas Distribution (CGD)

In March 2026, City Gas Distribution (CGD) marked a historic milestone by overtaking Fertilizer to become India's Number 1 natural gas consuming sector for the first time in history, recording 46.5 MMSCMD (30.0% share) against Fertilizer's 40.0 MMSCMD (25.8% share). Across the full FY 2025–26, CGD averaged 45.3 MMSCMD (23.9% share), closing the gap on Fertilizer (53.8 MMSCMD / 28.5% share) and transforming natural gas into a nationwide clean mobility and household utility.

For over four decades, subsidized urea manufacturing plants held undisputed reign as the foundational anchor of Indian gas demand. Across FY 2025–26, Fertilizer consumption stood at 53.8 MMSCMD, while CGD expanded rapidly across 300+ Geographical Areas. This structural shift marks the culmination of a 40-year transformation in how India produces, allocates, and consumes natural gas across four market eras:

WHERE INDIA USES NATURAL GAS

Gas powers five vital pillars of the economy:

ERA 1: THE ANCHOR DUO (1987–2008)

When the landmark Hazira-Vijaipur-Jagdishpur (HBJ) pipeline was commissioned in 1987, it laid the foundation of India's modern gas grid. During this inaugural era, the market was structured around two heavyweight bedrock consumers: Fertilizer (~45%) and Power (~32%).

Low-cost domestic gas allocated under the Administered Price Mechanism (APM) was strictly directed towards heavy industrial facilities. Fertilizer plants along the HBJ pipeline corridor converted to natural gas feedstock to deliver affordable domestic urea for the nation's green revolution, while utility-scale combined cycle gas turbines supplied steady baseload electricity.

In sharp contrast, city gas was barely visible on the national balance sheet. Consuming just 2 MMSCMD in 1987 and reaching 5 MMSCMD by 2000, CGD accounted for less than 5% of national offtake. Network infrastructure was confined almost exclusively to early municipal pilot programs in Mumbai (MGL) and Delhi (IGL).

ERA 2: THE KG-D6 SURGE (2002–2012)

The dawn of the 21st century sparked intense optimism regarding India's domestic upstream gas potential. In 2002, Reliance Industries announced the discovery of massive deepwater gas reserves in the KG-DWN-98/3 (KG-D6) block in the Krishna-Godavari basin. Industry projections and headlines anticipated 80+ MMSCMD of domestic output from this single basin, promising to effectively double India's domestic gas supply.

When commercial production commenced in 2009, national domestic gas production escalated to an all-time record run-rate of 145 MMSCMD. Power utilities responded by constructing modern gas-based generation units across Andhra Pradesh, Gujarat, and Maharashtra. By 2008–2009, gas offtake in the power sector surged to 45 MMSCMD (~31% share), briefly mounting a serious challenge to Fertilizer (46 MMSCMD) for the position of India's Number 1 gas-consuming sector.

ERA 3: THE TURNING POINT & STRANDED POWER (2013–2025)

The KG-D6 supply boom proved exceptionally short-lived. Severe geological complexities, unanticipated sand and water ingress, and precipitous reservoir pressure declines caused KG-D6 output to crash from over 60 MMSCMD to negligible volumes within a few years.

With domestic allocations vanishing, power plants turned to imported Regasified Liquefied Natural Gas (RLNG). However, with spot LNG commanding prices between $12 and $20/MMBtu, the cost of generating electricity from gas soared to ₹8–₹14/kWh. In state merit-order dispatch schedules, expensive gas generation was immediately priced out by cheaper domestic coal and plunging utility-scale solar tariffs. Over 24 GW of gas-based power generation capacity was rendered commercially stranded, causing power sector gas offtake to plummet back down towards 28 MMSCMD by 2022 and 21 MMSCMD by 2026.

While the Fertilizer sector was shielded from global price swings through the Government's 2015 Gas Pooling Scheme, national energy policy executed a decisive pivot towards retail City Gas Distribution. The Petroleum and Natural Gas Regulatory Board (PNGRB) rolled out aggressive nationwide bidding rounds covering more than 70% of India's population. Backed by top-priority domestic APM gas allocation for domestic PNG and vehicular CNG, CGD compounded at double-digit rates, officially overtaking Power for the Number 2 spot in FY22 at 33 MMSCMD.

ERA 4: THE HORMUZ CROSSOVER (2026)

In early 2026, geopolitical friction in West Asia triggered severe maritime supply bottlenecks across the Strait of Hormuz, constricting spot LNG deliveries and sending international gas prices spiking. As imported LNG volumes tightened across the country, non-priority industrial consumers, petrochemical units, and power plants were forced to absorb steep curtailments.

However, Government allocation mandates held firm: domestic gas was preferentially routed into urban city gas distribution networks to safeguard domestic household kitchens and urban public transport. Propelled by the cumulative addition of over 300 Geographical Areas, City Gas demand expanded to 1,443 MMSCM (46.5 MMSCMD / 30.0% share) in March 2026.

With Fertilizer offtake curtailed to 1,239 MMSCM (40.0 MMSCMD / 25.8% share), City Gas Distribution officially overtook Fertilizer for the first time in Indian monthly history. Across the full FY 2025–26, CGD averaged 45.3 MMSCMD against Fertilizer's 53.8 MMSCMD, narrowing the gap to its closest margin ever and setting the stage for permanent annual leadership under PNGRB's 2030 roadmap.

THE 2040 OUTLOOK

Under the PNGRB's official "Good-to-Go" (GtG) long-term planning scenario, this market inversion is not a transient anomaly—it represents a permanent structural realignment of the Indian energy economy.

Driven by the statutory Minimum Work Program (MWP) mandates across all 300+ GAs, CGD consumption is projected to expand to 87 MMSCMD by 2030 (commanding a 29% share of national gas consumption) and reach 216 MMSCMD by 2040. By 2040, City Gas Distribution alone is forecasted to account for 44% of India's total natural gas demand, dwarfing both Fertilizer (73 MMSCMD) and Power (44 MMSCMD).

After four decades of market evolution—from industrial anchor pipelines to millions of individual domestic burners and vehicle fuel tanks—City Gas Distribution has firmly established itself as the growth engine and structural anchor of India's gas-based economy.