ICRA expects India natural gas consumption to recover and expand by 3–4 per cent year-on-year in fiscal 2027, reversing a period of near-term moderation in the current fiscal year. The rating agency pointed to an industrial demand rebound and continued roll-out of City Gas Distribution (CGD) networks as the main drivers of the improvement.
India natural gas consumption to gain momentum in FY2027
The agency noted that consumption slipped during the first seven months of FY2026, falling 4.5 per cent year-on-year as of that period. Lower offtake from major sectors including fertilisers, power generation and refineries accounted for much of the weakness. On current evidence, overall gas consumption for FY2026 is likely to be flat or to record a low single-digit decline.
Looking ahead, ICRA expects a pick-up in industrial offtake alongside steady expansion of the CGD network to underpin growth in FY2027. Key consuming sectors such as refining and fertiliser production, together with rising household and commercial use through CGD, are projected to support the 3–4 per cent rise.
The report also highlighted a persistent supply-side constraint. Domestic gas production has largely been stagnant, with gains from new output likely to be offset by natural declines at existing fields. That dynamic has limited the near-term upside for consumption but has not dampened demand prospects once industry activity strengthens.
On the price front, the broader energy environment is expected to be supportive. ICRA projects average crude oil prices in FY2027 of about $60–70 per barrel, reflecting moderate global demand growth alongside rising supplies. LNG prices have also eased on expectations of milder winter demand in key importing regions and healthy inventories, while significant global LNG capacity additions planned from 2027 should further temper prices.
Lower international prices are likely to feed through into softer domestic gas pricing, improving competitiveness for gas relative to alternate fuels. ICRA added that profitability for domestic crude producers should remain healthy at these price levels, leaving their capital expenditure plans largely intact and supporting upstream investment that could shore up future supply.
For policymakers and market participants, the outlook offers a mixed but constructive picture. In the short term, stagnant domestic production and temporary demand weakness have restrained volumes. Over the medium term, however, steady CGD expansion and recovering industrial activity point to a renewed demand trajectory, with potential benefits for equipment suppliers, pipeline operators and downstream users.
Investors and companies in the gas value chain may watch three indicators closely: industrial activity and refinery throughput, the pace of CGD network expansion into new urban and semi-urban areas, and any acceleration in domestic upstream output. Together these will determine whether the forecast 3–4 per cent rise materialises and whether India can convert near-term moderation into sustained consumption growth.
Overall, after a period of moderation, ICRA’s assessment suggests India’s natural gas market is poised to regain momentum in FY2027, providing a modest tailwind for energy transition efforts and industrial growth.
Key Takeaways:
- India natural gas consumption is expected to grow 3–4% year-on-year in FY2027, driven by industrial demand and City Gas Distribution (CGD) expansion.
- FY2026 saw near-term moderation with a 4.5% decline in the first seven months; overall FY2026 is likely to be flat or mildly down.
- Domestic production remains stagnant, while easing global LNG and moderate crude prices should ease domestic gas costs.
- Refining, fertilisers and CGD remain key demand pillars, supporting investor confidence and steady capex plans.
