India’s city gas distribution (CGD) sector is entering a new phase of expansion, driven by a combination of policy support, infrastructure development and efforts to strengthen domestic gas consumption. Industry stakeholders indicate that the recent emphasis on piped natural gas (PNG) expansion, increased focus on compressed biogas (CBG) integration and accelerated network development are reshaping priorities across the sector.
Expansion of network infrastructure
Over the past decade, the CGD sector has witnessed substantial growth in geographical coverage. According to industry participants, all 307 geographical areas (GAs) awarded under successive bidding rounds have now been covered (barring Andaman and Lakshadweep), extending the reach of natural gas infrastructure across most parts of the country. The focus has gradually shifted from network creation to network utilisation and customer acquisition.
As pipeline infrastructure and distribution networks mature, operators are increasingly concentrating on enhancing customer penetration, expanding PNG and CNG connections, improving service delivery, and increasing gas consumption across residential, commercial and industrial segments. This transition reflects the sector’s evolution from infrastructure development to demand generation and market expansion.
Indraprastha Gas Limited (IGL), one of the country’s largest CGD companies, crossed the milestone of 1,000 CNG stations in March 2026 and currently operates 1,026 stations across Delhi-NCR and its other authorised GAs. The company serves around 3.4 million domestic PNG customers and more than 13,000 commercial and industrial (C&I) consumers. Its pipeline infrastructure extends to approximately 30,000 km, including over 28,000 km of medium-density polyethylene (MDPE) network and more than 3,000 km of steel pipelines. The company continues to add approximately 0.25 million-0.3 million domestic PNG customers annually while expanding its CNG station network by around 80-100 stations each year.
Meanwhile, IRM Energy has developed infrastructure across four GAs, namely Banaskantha, Fatehgarh Sahib, Diu and Gir Somnath, and Namakkal and Tiruchirappalli. The company has completed approximately 150 km of steel pipeline and over 2,500 km of MDPE pipeline. It has completed 150 CNG stations, connected around 84,000 domestic consumers, served more than 500 commercial customers and supplied gas to around 221 industrial consumers, as of March 31, 2026.
Vadodara Gas Limited (VGL), among the oldest city gas companies in the country, currently serves close to 300,000 domestic customers and over 3,100 commercial consumers. The company operates close to 57 CNG stations and three liquefied natural gas (LNG) stations across Vadodara and Chhota Udaipur districts. Its daily gas sales are approaching 500,000 standard cubic metres.
Green Gas Limited (GGL), operating across Lucknow, Agra, Ayodhya, Sultanpur and Unnao, currently manages nearly 100 CNG stations and serves approximately 160,000 domestic customers, along with C&I consumers. The company has developed nearly 6,000 km of MDPE network and is continuing network expansion across emerging markets.
Increasing focus on domestic PNG
According to CGD operators, recent policy measures have created significant momentum for PNG expansion. Government support has included faster permissions from state authorities, streamlined approvals from agencies such as the National Highways Authority of India, defence authorities and railways, and accelerated clearances from safety regulators. These initiatives have helped reduce project execution timelines, improve coordination among stakeholders and facilitate faster network roll-out. The resulting regulatory support has strengthened investor confidence and enabled operators to expand infrastructure more efficiently across both existing and newly awarded geographical areas.
The focus on domestic PNG is also linked to energy security considerations. India currently has approximately 320 million LPG customers, compared to around 16 million domestic PNG customers. As a result, there is considerable scope for increasing PNG penetration. Thus, the sector is witnessing increased demand for new PNG connections. Several companies have consequently revised their customer acquisition targets upward.
IGL, which has been adding domestic PNG customers annually, plans to increase additions to 0.35 million-0.4 million customers per year. VGL reported a significant increase in installation activity, with daily connection rates rising from 40-50 households to nearly 200 households per day. The company plans to add another 0.1 million domestic customers over the next two years. Similarly, GGL has intensified efforts to expand household connectivity. The company expects its overall operations to expand by 30-40 per cent over the next two to three years, supported by stronger PNG adoption.
Industry participants observed that while substantial pipeline infrastructure already exists, utilisation levels remain below potential. A large number of households have pipeline access but have yet to convert to PNG usage. Increasing conversion rates is therefore becoming an important operational priority.
C&I opportunities
While domestic PNG is receiving increased attention, CGD companies continue to view C&I customers as important growth segments.
IGL currently adds approximately 2,000 C&I customers annually and expects continued growth in this segment. According to company representatives, recent policy support and administrative reforms could further accelerate commercial customer acquisition.
VGL is targeting significant growth among industrial customers. The company currently serves around 82 industrial consumers but plans to expand this number to nearly 200 over the next few years. It also intends to increase commercial customer numbers by around 500.
Meanwhile, GGL sees substantial opportunities in commercial establishments, particularly in urban centres such as Lucknow and Ayodhya. The company is actively engaging with hotel associations, restaurants and commercial establishments to expand gas adoption.
However, industrial customer acquisition continues to be influenced by fuel price competitiveness. Several industrial users remain sensitive to fluctuations in gas prices and often compare natural gas economics with alternative fuels such as coal, furnace oil and LPG. In some regions, companies have also encountered challenges in sustaining industrial demand when fuel price differentials become less favourable.
Capex plans
The sector’s growth ambitions are reflected in sizeable capex commitments. Across companies, major procurement requirements include compressors, dispensers, cascades, meters, MDPE pipelines and related distribution infrastructure.
IGL has been investing approximately Rs 12 billion-Rs 15 billion annually in network expansion and associated infrastructure. The company expects investment levels in its core business segments to remain broadly similar over the coming years. IRM Energy has outlined an aggressive investment programme, with planned capex of approximately Rs 2.55 billion for the current year. Internal targets are reportedly even higher. A substantial share of this investment is being directed towards network development in Namakkal and Tiruchirappalli, where infrastructure creation remains a priority.
VGL has budgeted approximately Rs 2.05 billion in capex during the current financial year. Investments will primarily focus on expanding CNG infrastructure, strengthening pipeline networks and enhancing customer connectivity.
GGL has similarly outlined annual capex plans of around Rs 1.96 billion, with spending concentrated on network expansion, CNG station additions and PNG connectivity.
Expansion of CNG infrastructure
The transport segment remains a major contributor to CGD volumes. India’s nationwide target for CNG stations is around 18,500 stations, compared to roughly 8,500 currently operational. This indicates substantial scope for further expansion.
IGL continues to strengthen its position in the segment through annual additions of 80-100 CNG stations. The company views CNG as an important transition fuel and expects demand to remain robust. VGL plans to add 25 new CNG stations during the current financial year through company-owned and dealer-operated models. GGL also intends to add 14-15 stations annually across its GAs.
The CNG demand growth remains strong, particularly in Tier II and III markets, where infrastructure is still developing. The incremental volume growth is increasingly being driven by markets outside traditional metropolitan areas.
Advancing CBG integration
CBG is emerging as another major area of focus. It supports environmental sustainability, rural economic development and energy security. The sector is also being encouraged by blending obligations introduced by the government. Current national CBG offtake is around 400 tonnes per day. Companies are increasingly entering into partnerships with producers to secure future supplies.
Currently, IGL sources around 50 tonnes per day of CBG and has set an internal target of achieving 10 per cent blending by 2030, exceeding the government’s mandated blending levels. The company is already sourcing gas from multiple operational CBG facilities and has entered into partnerships with several additional producers. The company is also developing municipal solid waste-based CBG projects. A facility at Narela is operational, while another project is being developed in the Ghazipur area through collaboration with municipal authorities.
Other CGD operators are similarly increasing their engagement with CBG producers. Several companies have established injection facilities and are encouraging direct integration of CBG into their distribution networks. The recent supply concerns have strengthened interest in domestic renewable gas sources, including CBG.
LNG and long-haul transportation
Beyond conventional CNG applications, operators are exploring opportunities in LNG for heavy-duty transportation. A significant share of India’s diesel consumption is attributable to long-haul trucking. LNG is being viewed as a potential alternative fuel for this segment.
IGL has already commissioned LNG stations at strategic locations and plans additional facilities along major freight corridors. The company views LNG as a means of reducing emissions while supporting the decarbonisation of freight transport. VGL is also operating LNG stations and supplying LNG to customers through virtual pipeline arrangements.
Going forward, this segment is expected to gain importance as LNG infrastructure expands and adoption among fleet operators increases.
Supply security and sourcing strategies
Gas sourcing and supply security have become increasingly important considerations for CGD companies. India continues to rely on imports for approximately half of its natural gas requirements, with a substantial portion sourced from West Asian suppliers. Recent geopolitical developments have reinforced the importance of supply diversification and domestic alternatives.
Priority allocation mechanisms have supported CNG and domestic PNG consumers. In addition, government measures have ensured continued gas availability for priority sectors despite broader market challenges.
Companies are also diversifying sourcing portfolios through combinations of administered price mechanism (APM) gas, non-APM gas, regasified LNG and CBG. For instance, VGL sources gas through multiple long-term contracts and maintains a mix of domestic and imported supplies. GGL similarly procures gas from multiple sources to optimise availability and cost.
While supply continuity has generally been maintained, the price volatility remains an ongoing concern, particularly given the influence of global energy markets and currency movements.
Operational challenges
Despite strong growth prospects, several operational challenges remain. Contractor availability emerged as a common concern. As infrastructure development accelerates across the sector, demand for specialised contractors, pipeline installers and trained technicians has increased significantly.
Companies reported difficulties in securing sufficient manpower for PNG connections, pipeline laying and associated construction activities.
In addition, expansion into newer GAs presents challenges related to consumer awareness, affordability and infrastructure readiness. Operators in emerging markets continue to invest in outreach programmes, awareness campaigns and customer education initiatives to promote natural gas adoption. Meter availability, equipment procurement and logistics management have also required close attention as project execution scales up.
Outlook
The CGD sector is entering a period characterised by accelerated infrastructure deployment, expanding customer bases and growing emphasis on domestic gas utilisation. Across the residential, commercial, industrial and transportation segments, operators are increasing investments and strengthening network capabilities.
The combination of supportive policy measures, expanding infrastructure and greater focus on PNG and CBG is expected to influence sector development over the coming years. At the same time, companies continue to address challenges related to execution capacity, customer acquisition and supply management as they pursue ambitious growth targets across their authorised GAs.
Based on remarks made by representatives from Green Gas Limited, IRM Energy Limited, Indraprastha Gas Limited and Vadodara Gas Limited at a recent India Infrastructure conference.
