Natural gas consumption to decline by 4.5% in 7 months of FY 2026; Prices, credit outlook remain stable

According to ICRA, India’s natural gas consumption declined by 4.5% year-on-year during the first seven months of FY26 due to reduced offtake from the fertilizer, power and refinery sectors. However, City Gas Distribution (CGD) continued to register healthy growth and remains the major driver of gas consumption in the country. Total gas consumption is expected to remain stable or grow in low single digits in FY2026.

Expectations of a warmer winter in the EU, China and the US, as well as good gas reserves in major consuming countries, have pushed global LNG prices lower. ICRA said LNG prices are likely to decline from CY2027 onwards as a result of upcoming large LNG capacity additions globally.

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Domestic gas prices are also expected to soften due to lower crude oil prices amid increasing global crude oil supply and stable demand. The rating agency expects APM gas price for January 2026 to be around $6.1 per mmBtu, which is expected to benefit CGD entities by mitigating the impact of currency depreciation.

ICRA said capex intensity for the sector will remain high over the next three years due to continued investment in CGD infrastructure, gas pipelines and petrochemical capacities. As a result, industry debt levels are estimated to increase to ₹300 billion by March 31, 2026, although leverage indicators are expected to remain healthy, with interest coverage at 17x and OPBDITA’s total debt at 1.1x for FY2026.

The credit profile of most incumbents is expected to remain stable, along with healthy margins, liquidity and strong financial flexibility, supported by regulatory protection or dominant competitive position in their respective sectors and regions.