New Delhi: The Petroleum and Natural Gas Regulatory Board (PNGRB) on Wednesday highlighted the need for states to rationalise value-added tax (VAT) on natural gas, noting that wide variations are creating affordability challenges for consumers and slowing the adoption of cleaner fuels.
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The regulator said VAT rates currently range from as low as 5 percent in some states to over 20 percent in others, resulting in sharp differences in piped natural gas (PNG) and compressed natural gas (CNG) prices across the country. “The selling price of Domestic PNG in the country varies from approx Rs 45/SCM in Tripura to Rs 63/SCM in Uttarakhand. Similarly, CNG price varies from approx Rs 74.60/kg in Puducherry to Rs 103.80/kg in Uttarakhand,” PNGRB noted.
PNGRB welcomed recent state-level moves to lower taxes, pointing out that such steps directly benefit households, industries, and public transport operators. The Government of Bihar cut VAT on CNG and PNG from 20 percent to 12.5 percent and slashed VAT on PNG for industrial use from 20 percent to 5 percent. Chhattisgarh reduced VAT on natural gas from 14.5 percent to 5 percent.
According to the regulator, “This tax relief is expected to lower consumer prices, making CNG and PNG more accessible for households, public transport operators, and industries. Overall, the reduction in VAT would drive higher gas consumption, enhance CGD network viability, support industrial competitiveness, and contribute to cleaner air and energy sustainability in the state.”
Alongside VAT reforms, PNGRB underlined the importance of state-level City Gas Distribution (CGD) policies to streamline approvals and accelerate last-mile connectivity. As of July 2025, 11 states and Union Territories, including Madhya Pradesh, Bihar, Rajasthan, Assam, and Tamil Nadu, have notified such policies. Collectively, these states represent more than 55 percent of India’s population and about 60 percent of households.
PNGRB has set a Minimum Work Programme (MWP) target of 12.63 crore PNG domestic connections, 18,336 CNG stations and 5.46 lakh inch-km pipeline infrastructure by 2034. Of this, 7.85 crore PNG connections and 10,131 CNG stations are to be completed in the states that have adopted CGD policies.
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Policy support and VAT rationalisation have already helped boost gas adoption. CNG vehicle registrations rose nearly 25 percent in FY25 compared to the previous year, reaching 81.95 lakh by March 2025. Gas sales increased by around 21 percent in the same period, with 1,206 new CNG stations added. In FY25, about 21 lakh new domestic PNG connections were also provided, contributing to an 11 percent rise in gas sales nationwide. The government has set a target of ramping up the share of natural gas in India's energy mix from 6 percent at present to 15 percent by 2030.