Natural Gas Pipeline Tariff Regulations
India’s energy sector witnessed a major regulatory update in 2025. The Petroleum and Natural Gas Regulatory Board (PNGRB) approved the Second Amendment to the Natural Gas Pipeline Tariff Regulations. This reform aims to simplify tariffs, promote cleaner energy, and boost investment in natural gas infrastructure. The changes align with the vision of “One Nation, One Grid, One Tariff” to create a unified, consumer-friendly gas market.
Reduction of Unified Tariff Zones
The PNGRB reduced the number of tariff zones from three to two. Earlier, zones were based on distance from the gas source – Zone 1 (up to 300 km), Zone 2 (300–1,200 km), and Zone 3 (beyond 1,200 km). This step simplifies the tariff structure and makes gas transportation more equitable. It ensures uniform tariffs over larger areas, improving access in remote and underserved regions.
Extension of Zone 1 Tariff Nationwide for CNG and PNG
The Zone 1 unified tariff, previously limited to areas within 300 km of gas sources, is now applied nationwide for Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) for domestic use. This move lowers costs for millions of urban households and transport networks. With over 7,395 CNG stations and 14 million PNG connections as of late 2024, the reform supports wider adoption of cleaner fuels and reduces urban pollution.
Mandatory Long-Term Gas Procurement
To stabilise tariffs and ensure efficient supply, pipeline operators must now procure at least 75% of their annual system-use gas through long-term contracts of three years or more. This reduces procurement risks and transaction costs. The policy promotes tariff predictability, benefiting consumers and investors by creating a stable market environment.
Pipeline Development Reserve
PNGRB introduced the Pipeline Development Reserve (PDR) to fund expansion. Pipeline entities exceeding 75% utilisation contribute 50% of their net-of-tax earnings to the PDR. Half of these funds are reinvested in infrastructure, while the other half benefits consumers through tariff adjustments. This performance-linked model incentivises efficient pipeline use and supports sustainable network growth.
Focus Areas
The reforms prioritise consumer interests by lowering tariffs and ensuring affordable natural gas access. They also aim to make the gas sector more investment-friendly by simplifying regulations and encouraging long-term planning. This balance encourages a cleaner, greener energy transition and supports India’s growing energy needs.
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