Leh, August 27: In a major decisive step towards promoting affordable clean energy, strengthening the City Gas Distribution network and improving the ease of living for the people, Lieutenant Governor, Shri Vinai Kumar Saxena, has approved a significant reduction of VAT on Natural Gas in Ladakh, from the existing 21% to just 5%.
This reduction of VAT on Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) would majorly boost the government’s larger plan of implementing City Gas Distribution (CGD) network that envisages providing piped household gas connections across the UT of Ladakh. This would make PNG and CNG more affordable for consumers, encourage wider adoption of cleaner fuels and contribute to Ladakh’s long-term clean-energy and sustainable development goals, as envisaged by Hon’ble Prime Minister, Shri Narendra Modi.
The decision follows a communication dated 22 June 2026, from the Petroleum and Natural Gas Regulatory Board (PNGRB), under the Ministry of Petroleum and Natural Gas, urging the UT Administration for a concessional fiscal framework for natural gas in Ladakh, so as to make the city gas distribution system more affordable. The PNGRB cited the difficult terrain, dispersed population centres, extreme climatic conditions and the high cost of transporting energy over long distances in Ladakh as critical factors that could adversely affect the economics of CGD development in Ladakh as compared to other parts of the country.
Considering the urgency and the larger benefits, L-G Shri Saxena, acting swiftly on the communication from the Centre, approved the proposal for reducing the VAT from the existing 21% to just 5%. This has brought the UT of Ladakh at par with states like Gujarat, Karnataka and Andhra Pradesh that levy 5% VAT on natural gas. Notably, Natural gas remains outside the GST framework and is subject to the VAT regime of the respective States and Union Territories.
“Our objective is to make essential energy more affordable to the people of Ladakh while creating an enabling environment for investment and infrastructure development. The reduction of VAT on natural gas will support the expansion of PNG and CNG services, strengthen the clean-energy ecosystem and improve the quality of life of our people. These measures reflect the UT Administration’s commitment to building a more connected, competitive, clean and sustainable Ladakh,” said L-G Shri Saxena.
The PNGRB has authorised Bharat Petroleum Corporation Limited (BPCL) to develop the City Gas Distribution infrastructure in Ladakh. Subsequently, PNGRB had recommended bringing PNG and CNG under a concessional VAT framework at 5% or lower, noting that affordability would be critical for consumer adoption and demand creation during the initial years of CGD development in Ladakh.
Notably, the Ladakh Administration had also reduced VAT on Aviation Turbine Fuel (ATF) for civilian aircraft from 26.25% to 1%, in order to make air travel to Ladakh more competitive and make Ladakh a refuelling hub. The measure was undertaken in the context of the national policy push led by the Hon’ble Prime Minister for promoting regional air connectivity under the UDAN scheme. The 1% rate for civilian aviation fuel is lower than the rates prevailing in several States, including Delhi and Maharashtra.