India's Gas Crisis: Demand Destruction and Dependence on Imported LNG

India's natural gas sector is experiencing a paradoxical moment, where consumption has been falling sharply despite the government's policy goal of increasing its share in the country's primary energy basket. In the first seven months of 2025-26, natural gas consumption declined by 8.6 percent year-on-year to 40,068 million metric standard cubic meters (mmscm). This is not a blip but a structural phenomenon: demand destruction, driven by global price shocks, supply disruptions, and domestic production decline.

The country meets only about 50-52 percent of its natural gas demand through domestic production, with the remainder supplied through LNG imports. The West Asia conflict and the closure of the Strait of Hormuz nearly choked off half of India's LNG imports from the region, leading to a surge in spot prices. Qatar accounted for 41 percent of India's imports, followed by the US and the UAE.

The result has been a steep contraction in consumption. India's gas demand fell to 155 mmscmd in March 2026, down 20 percent month-on-month and 15 percent year-on-year. The International Energy Agency now projects India's natural gas demand will decline by approximately 8 percent in 2026.

The government has invoked the Essential Commodities Act and notified the Natural Gas (Supply Regulation) Order 2026 to prioritise essential segments, but these are crisis-management measures, not solutions. The biggest hurdle to higher gas consumption is taxation, as India continues to expand its gas infrastructure but struggles with affordability.