01 September 2026
Background and Legislative Basis
The Principal Order was introduced against the backdrop of the disruption of LNG shipments through the Strait of Hormuz arising from the ongoing conflict in the Middle East. The March 2026 notification recorded that suppliers had invoked force majeure clauses, resulting in the diversion of natural gas towards priority sectors.
The Principal Order was issued under Section 3 read with clauses (d) and (f) of sub-section (2) of Section 3 of the Essential Commodities Act, 1955. The Order regulated the production, sector-wise allocation and diversion of natural gas supplies, as well as the distribution, disposal, acquisition, use and consumption of natural gas, including LNG and re-gasified LNG, with the stated objective of ensuring equitable distribution and continued availability of natural gas for priority sectors.
The July Amendment Order has been issued under the same statutory framework.
The March 2026 Natural Gas Supply Framework
The Principal Order established a priority-based framework for the allocation and supply of natural gas.
Priority Sector I comprised domestic Piped Natural Gas (“PNG”), Compressed Natural Gas (“CNG”) for transport, LPG production including LPG shrinkage requirements, and pipeline compressor fuel and essential pipeline operational requirements. The Order provided for these requirements to be maintained at 100% of their past six-month average gas consumption, subject to operational availability.
Priority Sector II comprised fertilizer plants. The Order provided for their gas supply to be maintained at 70% of their past six-month average gas consumption, subject to operational availability. The gas supplied to such units was required to be used for fertilizer production, with the prescribed certification mechanism involving the Petroleum Planning and Analysis Cell (“PPAC”).
Priority Sector III comprised tea industries, manufacturing and other industrial consumers supplied through the national gas grid. The applicable supply level was 80% of past six-month average gas consumption, subject to operational availability.
Priority Sector IV comprised industrial and commercial consumers supplied through City Gas Distribution (“CGD”) networks. The Order provided for supply at 80% of past six-month average gas consumption, subject to operational availability.
The Principal Order also established an order of curtailment for meeting the requirements of priority sectors. Gas supplied to petrochemical facilities could be fully or partially curtailed, including supplies to ONGC Petro Additions Limited, the GAIL Pata Petrochemical Complex, Reliance O2C and other High-Pressure High-Temperature (“HPHT”) gas consumers. Power plants could also be curtailed as required.
The Order further required oil refining companies to absorb the impact of the LNG supply disruption by reducing their natural gas allocation to approximately 65% of their past consumption, subject to the terms of the Order.
Gas Redistribution and Pooling Mechanism
The March 2026 framework also provided for the redistribution and pooling of natural gas supplies.
GAIL, in coordination with PPAC, was required to manage natural gas supplies for implementation of the directions under the Principal Order. PPAC was required to notify the pooled price for natural gas diverted from non-priority sectors to priority sectors.
Entities receiving pooled gas were required to accept the pooled price and undertake not to resell diverted natural gas. The framework therefore established a mechanism through which available gas could be diverted from specified non-priority consumers to meet the requirements of priority sectors.
The Principal Order also imposed compliance requirements on entities involved in the production, import, marketing, transportation and supply of natural gas. These included natural gas producers, gas marketing entities, LNG terminal operators, natural gas pipeline operators and CGD entities. Such entities were required to comply with directions concerning revised supply schedules, diversion of supplies and sector-wise allocation issued by the Central Government in coordination with GAIL.
Overriding Effect on Existing Contractual Arrangements
A significant contractual provision was contained in paragraph 6 of the Principal Order, titled “Overriding effect on existing contractual arrangements.”
The provision stated that the Principal Order would have effect notwithstanding anything inconsistent contained in Gas Sale Agreements (“GSAs”) and other commercial arrangements.
This provision was significant because it expressly addressed the relationship between the Government-mandated supply framework and existing contractual arrangements governing the supply of natural gas.
The July Amendment Order now expressly omits paragraph 6, along with paragraphs 2 to 5.
The July 2026 Amendment
The Amendment Order makes a specific structural change to the Principal Order.
It provides that paragraphs 2 to 6 of the Principal Order shall be omitted. It further provides that paragraph 7 shall be renumbered as paragraph 2.
The effect of this amendment is that the provisions contained in paragraphs 2 to 6 of the March 2026 framework no longer form part of the Principal Order. These paragraphs contained the substantive framework concerning priority-sector supplies, curtailment and redistribution, pooling, compliance directions and the overriding effect over inconsistent contractual arrangements.
The provision originally contained in paragraph 7 is retained and renumbered as paragraph 2.
Information-Furnishing Requirement Continues
Although paragraphs 2 to 6 have been omitted, the information-furnishing requirement contained in the former paragraph 7 remains part of the amended framework.
The provision applies to every producer, importer, transporter, marketer or distributor of natural gas, including LNG and re-gasified LNG. Such entities are required to furnish specified information relating to their activities to the Central Government or an officer authorised by it.
The information requirement covers matters including production, imports, stocks, allocation, supply and consumption. PPAC is designated as the nodal agency for the purpose of furnishing such information.
Following the July amendment, this provision operates as paragraph 2 of the amended Order.
Change in Regulatory Circumstances
The July Amendment Order records a change in the circumstances that had formed the basis for the March intervention.
The Principal Order had been introduced when the Central Government assessed that the ongoing conflict in the Middle East had disrupted LNG shipments through the Strait of Hormuz and that suppliers had invoked force majeure clauses.
The July Amendment Order records that the disruption had become subject to a ceasefire, negotiations were ongoing and sea traffic through the Strait of Hormuz had been permitted to resume.
The Amendment Order therefore changes the legal framework that had been introduced in March in response to the supply disruption. However, the notification does not itself characterise the amendment as a permanent deregulation of natural gas supply. Its operative provisions expressly provide for the omission of paragraphs 2 to 6 and renumbering of paragraph 7.
Legal and Regulatory Implications
The July amendment is significant from a contractual and regulatory perspective because several substantive provisions introduced in March have been removed.
The March framework contained mandatory supply requirements for specified priority sectors, mechanisms for curtailment and redistribution of gas, a pooled-price mechanism and compliance directions applicable to participants across the natural gas supply chain. It also expressly provided that the Order would prevail over inconsistent provisions contained in GSAs and other commercial arrangements.
The omission of paragraphs 2 to 6 removes those provisions from the Principal Order.
Of particular relevance to existing contractual arrangements is the omission of paragraph 6. The March Order expressly stated that its provisions would operate notwithstanding anything inconsistent contained in GSAs and other commercial arrangements. That express overriding provision is among the provisions omitted by the July Amendment Order.
Key Takeaways
The 2026 Amendment makes important changes to the natural gas supply framework introduced in March 2026. The Amendment Order removes paragraphs 2 to 6 of the Principal Order, which covered priority-sector supply requirements, gas allocation, pooling arrangements, directions for entities involved in the natural gas supply chain and the treatment of GSAs and other commercial arrangements.
The requirement to provide information under paragraph 7 of the Principal Order continues to apply and has been renumbered as paragraph 2. The Amendment Order came into effect on 4 July 2026, the date of its publication in the Official Gazette.
The amendment follows the Central Government’s assessment regarding the situation affecting LNG supplies through the Strait of Hormuz, including the ceasefire and ongoing negotiations that allowed sea traffic through the Strait to resume.
Conclusion
The 2026 Amendment represents a significant change to the emergency natural gas supply framework introduced by MoP&NG in March 2026.
The March framework established priority-sector supply requirements, mechanisms for gas allocation, pooling arrangements, compliance directions for participants across the natural gas supply chain and provisions dealing with GSAs and other commercial arrangements.
The July Amendment removes these provisions by omitting paragraphs 2 to 6 of the Principal Order. It nevertheless retains the information-furnishing requirement originally contained in paragraph 7, which now operates as paragraph 2.
The amendment was made in light of changed circumstances recorded by the Central Government concerning LNG shipments through the Strait of Hormuz, including the ceasefire, ongoing negotiations and the resumption of sea traffic. From a legal perspective, the key consequence is the removal of the supply-allocation and contractual provisions introduced in March, while retaining the information-reporting framework for participants in the natural gas supply chain.
