Middle East war rattles oil markets: India invokes Essential Commodities Act for gas supply — what it means

NEW DELHI: As the conflict in West Asia continues to disrupt global energy flows, the Indian government has moved to safeguard domestic fuel supplies. With crude oil prices fluctuating amid uncertainty over shipments through the Strait of Hormuz, New Delhi has invoked provisions of the Essential Commodities Act (EC Act) to regulate the supply and distribution of natural gas and ensure priority sectors continue to receive fuel.The move comes as concerns grow over possible disruptions to liquefied natural gas (LNG) shipments in the region. Officials believe prolonged instability could affect fuel availability and drive up prices, putting pressure on essential sectors and household energy consumption.To prevent shortages, the Union government has issued directives to refineries and petrochemical units to maximise the production of liquefied petroleum gas (LPG). Additional output has been specifically earmarked for domestic use, with authorities emphasising that cooking gas supply to households remains a priority during the ongoing geopolitical uncertainty.The ministry of petroleum and natural gas has also introduced a 25-day inter-booking period for LPG consumers to prevent hoarding and curb black-marketing. In a statement posted on X, the ministry said the order was issued “in light of current geopolitical disruptions to fuel supply and constraints on supply of LPG,” adding that refineries had been asked to increase LPG production and divert additional output for domestic consumption.Alongside these measures, the government formally invoked the Essential Commodities Act to regulate natural gas distribution across sectors.What the act says:The order begins by explaining the circumstances that prompted the intervention.“Whereas, the Central Government has assessed that the ongoing conflict in the Middle East has resulted in the disruption of liquefied natural gas shipments through the Strait of Hormuz and supplies have invoked the need for securing equitable distribution of natural gas to the priority sectors.”It further refers to a Supreme Court ruling clarifying the legal status of natural gas.“And Whereas, the Hon’ble Supreme Court in the common judgment of Association of Natural Gas and others v. Union of India (In re Special Reference No. 1 of 2001) has held that natural gas and liquefied natural gas come within the purview of petroleum and petroleum products.”The order adds that petroleum products fall under the Essential Commodities Act, giving the Centre powers to regulate supply.“And Whereas, the petroleum and petroleum products are covered under entry 5 of the Schedule of the Essential Commodities Act, 1955 (10 of 1955).”Under Section 3 of the Act, the government may regulate supply and trade of petroleum products if necessary to maintain availability or ensure equitable distribution.Natural Gas (Supply Regulation) Order, 2026The order issued by the Centre states:“This order may be called the Natural Gas (Supply Regulation) Order, 2026.It shall come into force on the date of its publication in the Official Gazette.”It allows the government to regulate the production, supply and allocation of natural gas across sectors.Priority allocation of gasThe directive divides gas allocation into four priority sectors.Priority Sector I includes:

Gas supply to these sectors will be treated as priority allocation and maintained subject to operational availability.Priority Sector II covers fertiliser plants, which must receive seventy per cent of their past six-month average gas consumption, subject to operational availability. The order specifies that the gas must only be used for fertiliser production.Priority Sector III includes tea industries, manufacturing units and other industrial consumers connected through the national gas grid. Gas marketing entities must ensure supply is maintained at eighty per cent of their past six-month average consumption.Priority Sector IV covers industrial and commercial consumers supplied through City Gas Distribution networks, which must also receive eighty per cent of their past six-month average gas consumption.Curtailment for non-priority sectorsTo maintain supplies for priority users, the government has allowed curtailment of gas to other sectors.Petrochemical facilities — including ONGC Petro additions Limited, GAIL Pata Petrochemical Complex and Reliance O2C — may face supply reductions first, followed by power plants if required.Refineries have also been asked to absorb part of the disruption by cutting gas consumption.The order states:“Oil refining companies shall absorb the impact of LNG supply disruption to the extent feasible by reducing gas allocation to refineries to approximately sixty-five per cent of their past six-month gas consumption, subject to operational feasibility.”Finally, the directive requires all producers, importers, marketers and distributors of natural gas — including LNG and re-gasified LNG — to provide detailed information on production, imports, stocks, supply and consumption to the central government.