City Gas Distribution (CGD) is a concept and a network system for supplying natural gas to retail customers through pipelines and Compressed Natural Gas (CNG) stations in a specific geographical area (GA). The CGD network delivers Piped Natural Gas (PNG) to domestic, commercial, and industrial consumers, and Compressed Natural Gas (CNG) for the automotive segment. The system's expansion received a significant boost in 1998 when the Supreme Court mandated the conversion of vehicles in Delhi to CNG to address urban pollution.
The legal framework for CGD is provided by the Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006. This Act established the PNGRB in 2006 as the independent sectoral regulator to protect consumer interests, promote competitive markets, and ensure the orderly development of the downstream petroleum and natural gas sector. The PNGRB grants authorization to entities to lay, build, operate, or expand CGD networks in a defined GA through a competitive bidding process. The authorized entity is given physical exclusivity for the CGD infrastructure for a period, often 25 years, and must adhere to a Minimum Work Program (MWP) set by the PNGRB. The PNGRB also regulates access to the CGD network to ensure fair competition and prescribes technical and operational standards.
A major recent change is the introduction of the Compressed Bio-Gas (CBG) Blending Obligation (CBO) by the National Biofuels Coordination Committee in November 2023. This mandate requires CGD operators to procure and blend CBG into the CNG (Transport) and PNG (Domestic) segments to stimulate demand for CBG, promote a circular economy, and achieve import substitution for Liquefied Natural Gas (LNG). The CBO was voluntary until FY 2024-25 and became mandatory starting in FY 2025-26. The mandatory blending obligation is set at 1% of total CNG/PNG consumption for FY 2025-26, increasing to 3% in FY 2026-27, 4% in FY 2027-28, and reaching 5% from FY 2028-29 onwards. The Ministry of Petroleum & Natural Gas also introduced the CBG-CGD Synchronisation Scheme to facilitate the co-mingling of Biogas/CBG with domestic gas in the CGD networks.