India’s Natural Gas Consumption to Rebound to 3–4% in FY27: ICRA
Growth to be driven by industrial recovery and steady expansion in city gas distribution after near-term moderation in FY26
India’s natural gas consumption is expected to grow by 3–4% year-on-year in FY2027, rebounding after a phase of near-term moderation in FY2026, according to rating agency ICRA. The recovery will be supported by increased offtake from refining, fertiliser and city gas distribution (CGD) sectors, positioning natural gas as a key pillar in India’s evolving energy mix.
| FY2026-FY2027 Transition: Key Sectoral Shifts | |||
| Parameter | FY2026 Trend | FY2027 Projection | Primary Change Driver |
| Natural Gas Consumption | Moderate / Low single-digit growth | 3-4% YoY Growth | Recovery in industrial demand & CGD expansion |
| Crude Oil Price (Brent) | Range-bound | $60-70/bbl Average | Balanced global supply-demand dynamics |
| Domestic POL Consumption | Slowing growth | 1-2% YoY Growth | Market saturation & fuel substitution |
| Refining Margin (GRM) | Stable | $4-5/barrel | Steady regional product market conditions |
| Upstream Capex Momentum | Sustained | Plans to Remain Intact | Healthy producer cash flows |
The moderation in FY2026 is reflected in a 4.5% year-on-year decline in gas consumption during the first seven months of the fiscal, largely due to lower offtake from major consuming segments such as fertilisers, power and refineries. While the CGD segment continues to record healthy growth and remains a key structural driver, overall gas consumption in FY2026 is expected to remain flat or witness low single-digit moderation.
This slowdown coincides with stagnant domestic gas production, where incremental output is likely to be offset by natural decline from mature fields, limiting supply-side support in the near term.
“ICRA expects natural gas consumption in the country to grow 3–4% y-o-y in FY2027, supported by increased offtake from the refining, fertiliser and city gas distribution sectors,” said Varun Gogia, Assistant Vice President & Sector Head, ICRA.
Providing a broader energy outlook, Gogia noted that crude oil prices are expected to average $60–70 per barrel in FY2027, driven by muted global demand growth amid rising supplies. “Even at these levels, the profitability of domestic crude producers will remain healthy and their capex plans are likely to remain intact,” he said, adding that domestic consumption of petroleum products (POL) is expected to grow by 1–2% during the same period.
He further highlighted that Singapore Gross Refining Margins (GRMs) are expected to remain in the range of $4–5 per barrel, while marketing margins on retail auto fuels are likely to stay healthy due to stable crude prices. Under-recoveries in domestic LPG are also expected to reduce, offering further relief to oil marketing companies.
Supporting the gas demand outlook, global LNG prices have eased on expectations of warmer winters and healthy inventory levels in key regions. Additionally, significant LNG capacity additions globally are expected to lead to further price moderation from calendar year 2027 (CY2027). Domestic gas prices are also likely to soften in line with crude oil trends.
ICRA estimates the Administered Price Mechanism (APM) gas price for January 2026 at around $6.1 per mmbtu, which is expected to benefit CGD entities by partially offsetting the impact of currency depreciation.
Meanwhile, capital expenditure intensity in the sector is expected to remain high over the next three years, driven by continued investments in CGD infrastructure, gas pipelines and petrochemical capacities. As a result, industry debt levels are projected to rise to around Rs 300 billion by March 31, 2026.
Despite the higher leverage, ICRA expects debt metrics to remain healthy, with interest coverage at about 17x and Total Debt/OPBDITA at 1.1x in FY2026. The credit profile of most incumbents is likely to remain stable, supported by robust regulatory frameworks, strong market positions, healthy margins and sound financial flexibility.
