New Delhi: India’s natural gas consumption is expected to grow by 3–4 percent year-on-year in FY27, following a phase of near-term moderation in FY26, according to ratings agency ICRA. The rebound is expected to be driven by a recovery in industrial offtake from key sectors such as refining and fertilisers, along with continued expansion of the city gas distribution (CGD) network, positioning natural gas as a key component of India’s evolving energy mix.
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ICRA said the moderation in FY26 is evident from a 4.5 percent year-on-year decline in natural gas consumption during the first seven months of the fiscal, driven by lower offtake from major consuming sectors including fertilisers, power and refineries.
While the CGD segment continues to post healthy growth and remains a key driver, overall gas consumption for FY26 is expected to be flat or see low single-digit moderation. This trend also reflects stagnant domestic gas production, where incremental output is likely to be offset by natural decline from existing fields.
“ICRA expects natural gas consumption in the country to grow 3–4 percent yoy in FY27, supported by increased offtake from the refining, fertiliser, and city gas distribution sectors,” said Varun Gogia, Assistant Vice President and Sector Head at ICRA.
Gogia said the recovery in gas demand is set against a relatively stable broader energy price environment. “Crude oil prices are expected to average between USD 60–70 per barrel in FY27 due to muted global demand growth amid increasing supplies. Even at these levels, the profitability of domestic crude producers will remain healthy and their capex plans are likely to remain intact. Domestic consumption of petroleum products is expected to grow by 1–2 percent in the same period,” he said.
He added that “Singapore GRMs are expected to be in the range of USD 4–5 per barrel” and that marketing margins on retail auto fuels are likely to remain healthy due to stable crude prices, while under-recoveries in domestic LPG are expected to reduce.
Supporting the gas consumption outlook, ICRA said global LNG prices have softened amid expectations of warmer winters in key regions and healthy inventory levels. In addition, sizeable LNG capacity additions globally are expected to lead to a moderation in prices from calendar year 2027.
Domestic gas prices are also expected to ease in line with softer crude oil prices. ICRA expects the administered price mechanism gas price for January 2026 to be around USD 6.1 per mmbtu, which would benefit CGD companies by helping offset the impact of currency depreciation.
ICRA noted that capital expenditure intensity in the sector is likely to remain high over the next three years, driven by sustained investments in CGD infrastructure, gas pipelines and petrochemical capacities.
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As a result, industry debt levels are projected to rise to around Rs 300 billion by March 31, 2026. Despite this increase, debt metrics are expected to remain comfortable, with interest coverage of about 17 times and total debt to OPBDITA of 1.1 times in FY26.
The credit profile of most incumbents is expected to remain stable, supported by regulatory frameworks, dominant market positions, healthy margins and strong financial flexibility, ICRA said.
