Context:
The Union Ministry of Petroleum and Natural Gas invoked the Essential Commodities Act, 1955 through the Natural Gas (Supply Regulation) Order, 2026 due to disruptions in LNG imports via the Strait of Hormuz amid the West Asia conflict.
Key Highlights:
- Government Initiative / Policy Details
- Introduction of a four-tier priority system for natural gas allocation based on average consumption (last six months).
- Priority sectors protected, while lower-priority sectors (power, petrochemicals) face supply cuts.
- Implementation of a pooled pricing mechanism by Petroleum Planning & Analysis Cell (PPAC).
- Mandatory compliance: Priority sectors must accept pooled prices and waive litigation rights.
- Reasons for Gas Rationing
- Disruption of LNG supply through the Strait of Hormuz (critical global energy chokepoint).
- Around one-third of India’s LNG imports affected.
- Rising domestic demand with limited domestic production.
- Data & Statistics
- Total gas consumption (2024–25): 71.3 BCM.
- Import dependency: ~50%.
- Major suppliers: Qatar, USA, Russia, Australia.
- About Essential Commodities Act, 1955
- Enables government to regulate production, supply, distribution, and pricing of essential goods.
- Aims to prevent hoarding, black marketing, and profiteering.
- Covers items like food grains, petroleum products, LPG, natural gas, fertilisers, drugs.
- 2020 Amendment Highlights
- Liberalization of agricultural commodities.
- Stock limits imposed only under extraordinary conditions (war, famine, price rise).
- Price trigger: 100% (horticultural), 50% (non-perishable) increase.
Relevant Prelims Points:
- Essential Commodities Act, 1955:
- Empowers Centre (and states in some cases) to regulate essential goods.
- Petroleum Planning & Analysis Cell (PPAC):
- Attached office under MoPNG, monitors oil & gas sector data.
- Strait of Hormuz:
- Strategic chokepoint connecting Persian Gulf to global markets.
- LNG (Liquefied Natural Gas):
- Natural gas cooled to liquid form for transport and storage.
- BCM (Billion Cubic Metres):
- Unit to measure natural gas consumption.
Relevant Mains Points:
- Energy Security Concerns
- High import dependence exposes India to geopolitical risks.
- Vulnerability to global supply disruptions and price volatility.
- Economic Implications
- Impact on industrial sectors (power, fertilisers, petrochemicals).
- Increased input costs affecting inflation and growth.
- Policy Trade-offs
- Balancing market freedom vs state intervention during crises.
- Ensuring equitable distribution vs efficiency.
- Strategic Importance of Diversification
- Need to diversify energy sources and suppliers.
- Boost domestic gas production and renewable energy.
- Way Forward
- Strengthen strategic energy reserves.
- Promote renewable energy and green hydrogen.
- Enhance infrastructure for gas storage and distribution.
- Develop long-term LNG contracts to reduce volatility.
UPSC Relevance:
• GS Paper II – Governance (State intervention in markets)
• GS Paper III – Economy (Energy security)