CHINA will encourage the development of natural gas-powered cars but restrict the use of gas in power generation under a new industry policy, as it aims to use the cleaner-burning fuel more efficiently amid growing consumption.

Other sectors in the "preferential" category for gas use include households and public venues, the National Development and Reform Commission, the country's top planner, said yesterday.

Gas use in fertilizer manufacturing, petrochemical production or power generation falls either in the "restricted" category or the "banned" group, depending on specific product under the policy.

Gas consumption in the country has surged 21.5 percent to 130.7 billion cubic meters last year, as the government aims to rely less on oil and coal.

China now has more than 1 million vehicles powered by natural gas, which is set to rise to at least 1.5 million units by the end of 2015, Yao Mingde, honorary chairman of China Road Transport Association, said.

The NDRC also reiterated it will deepen reform in natural gas pricing. Current rules on price are making gas imports unprofitable for state energy companies which are increasing imports to meet domestic demand.

PetroChina Co, which stated building China's third west-to-east pipeline last month to bring in central Asia gas, lost 752 million yuan (US$120.6 million) in its natural gas and pipeline business in the third quarter, according to earnings results released on Tuesday.

"This is the second consecutive quarter the natural gas segment posted an operating loss, signaling the widening of import losses as volumes ramp up," Neil Beveridge, senior analyst at Sanford C. Bernstein & Co, said. But pricing reform is ''unlikely to happen in a material way'' until after spring next year.

China earlier this year launched a trial in Guangdong Province and Guangxi region to link gas prices to those of imported fuel oil and liquefied petroleum gas.