Summary:
IGL, MGL and Adani Total Gas rose up to 4% after the government announced a new incentive scheme to boost domestic PNG connections. Effective September 1, 2026, the scheme provides eligible CGD companies with additional lower-priced domestic APM gas for incremental connections. The move could lower gas costs and reduce PNG investment payback periods from around 10 years to nearly 3 years. With only 1.74 crore PNG connections versus 33.14 crore LPG customers, the sector has significant growth potential.
Shares of major city gas distribution companies rose sharply on August 19 after the government approved a new incentive scheme to accelerate household piped natural gas connections. Indraprastha Gas gained 3.5%, Mahanagar Gas rose 3.3% and Adani Total Gas advanced 2.2% in morning trade, even as the broader market remained weak.
The rally followed the launch of the APM/NAPM Incentive Scheme for Promotion of Domestic PNG Connections, which will take effect from September 1, 2026. The policy is designed to improve the economics of expanding household PNG networks while reducing India’s dependence on imported LPG.
How the New PNG Incentive Scheme Works
Eligible city gas distribution companies will receive an additional 200 standard cubic metres of lower-priced domestically produced APM gas for every incremental billed household PNG connection above the threshold fixed for the respective geographical area. The programme will operate through two tranches over six months.
The additional domestic gas will not necessarily be consumed by the new household itself. Instead, it can substitute more expensive LNG currently used by CGD companies in their CNG transport business, lowering the overall gas sourcing cost.
The government expects these savings to reduce the payback period on investment in new household PNG connections from around 10 years to approximately 3 years.
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India Has Just 1.74 Crore PNG Connections
The potential market remains large. India currently has around 1.74 crore domestic PNG connections, compared with approximately 33.14 crore active household LPG customers as of July 1. India also imports nearly 60% of its LPG requirements, with imports reaching around 22 million tonnes in 2025.
The West Asia conflict has added urgency to the transition because disruptions to fuel shipments have increased import costs and highlighted India’s exposure to overseas LPG supplies.
Government Builds a Wider PNG Push
The incentive scheme forms part of a broader policy drive. The government has introduced an accelerated approval framework and standardised right-of-way charges for PNG infrastructure. States are also being encouraged to lower VAT on natural gas to 5%.
National PNG Drive 2.0 includes household outreach, conversion of housing societies from LPG to PNG and a portal for surrendering LPG cylinders. A unified digital portal is also being developed to allow consumers to apply for and track new PNG connections.
Mahanagar Gas Steps Up Expansion Plans
The policy comes as CGD companies are already increasing expansion spending. Mahanagar Gas plans to raise FY27 capital expenditure by 20% to ₹1,800 crore and aims to add as many as 10 lakh PNG connections. Its daily connection rate could increase from around 1,000 to as much as 3,000. The company already operates an 8,477 km network and completed a record 97,461 domestic PNG conversions in Q1FY27.
Why City Gas Distributor Stocks Surged
The immediate stock reaction reflects the possibility of lower gas procurement costs, faster customer additions and materially shorter investment payback periods. Indraprastha Gas, Mahanagar Gas and Adani Total Gas gained 3.5%, 3.3% and 2.2%, respectively, after the announcement.
Unlike many policy announcements where benefits are long-dated, this scheme links additional low-cost gas directly to incremental paying connections. The key factors ahead will be the pace of household conversions, actual APM gas availability and whether lower sourcing costs translate into stronger volumes and margins across the city gas distribution sector.
