India’s energy status reflects the fact that it is the third largest primary consumer after China, the US and Africa. Moreover, it is one of the world’s most significant consumers of energy, and one of the fastest growing markets. With population growth, urbanisation and rising standards of living, there will be an increasing demand for renewable energy. The primary energy basket is dominated by coal and oil, which together account for around 86 per cent. Gas represents approximately 6.7 per cent of India’s total energy mix, or 60 billion cubic metres (bcm).
India is confronted with the trilemma of obtaining more energy access while maintaining high levels of energy security and sustainability. A gas-based economy is the first step towards tackling these issues. The current goal is to increase the share of natural gas in the primary energy mix to 15 per cent, or 180 bcm, by 2030.
India ranks 13th in terms of overall absolute gas consumption, which is somewhat less than the global average of 25 per cent. There is considerable room for growth of the gas share, considering gas is not commonly accessible domestically and must be imported. The US consumed the most gas in 2020, at 832 bcm, growing at a rate of 3.2 per cent from 2019 to 2020. The Russian Federation stood second with 411.4 bcm, followed by China with 330.6 bcm, growing at the rate of 1.1 per cent and 13.1 per cent respectively.
The natural gas sector
Fertiliser is the largest driver of sectoral demand, followed by the power sector and city gas distribution (CGD). CGD is expected to account for a large share of future consumption levels. Despite a decrease in domestic demand due to Covid-19, liquefied natural gas (LNG) use has surged 1.5 times. Domestic consumption, meanwhile has since been restored to pre-crisis levels. Fertiliser use is expected to rise in the future, with refineries, CGD and other sectors influencing the balance.
Several industries have grown over time. Fertilisers have grown in popularity over the last year, and there has been a significant shift towards CGD, which is the key driver. While the power sector has been a reliable and consistent consumer, it is expected to decline in the near future. There are currently 230 general assemblies containing 402 districts spread across 27 states and union territories in India (up to the 10th round). CGD covers 70 per cent of India’s population and 53 per cent of its geographical area. The amount of gas consumed during fiscal year 2020-21 was 25.3 million litres (domestically, 13.1 mmscmd with R-LNG at 12.2 mmscmd). During the period 2020-21, it is expected to contribute 16.4 per cent of India’s total gas consumption. GAIL’s CGD businesses include seven joint ventures and three subsidiaries operating in 61 geographical areas across six cities, including the Jagdishpur-Haldia-Bokaro-Dhamra natural gas pipeline (JHBDPL).
The recently introduced energy vision for the country includes six objectives: transitioning to a gas-based economy, smarter use of fossil fuels and increased dependence on domestic sources of biofuels, 450 GW of renewable energy by 2030, electric vehicles to decarbonise mobility, focus on emerging fuels such as hydrogen, and digital innovation across all energy systems. Additionally, at COP26, India committed to increasing its non-fossil energy capacity to 500 GW, reducing its economy’s carbon intensity to 45 per cent and sourcing 50 per cent of its energy needs from renewable sources, while reducing its total projected carbon emissions by 1 billion tonnes per year – all by 2030.
The government intends to expand the National Gas Grid. At the moment, around 16,788 km of natural gas pipeline is operational, while approximately 14,239 km is being developed to improve natural gas supply throughout the country. These pipelines have been authorised by the Petroleum and Natural Gas Regulatory Board and are now in various phases of completion, including pre-project activities, construction, testing and commissioning. It is one of the world’s largest operational synchronous grids, with an installed capacity of 371.054 GW as of June 30, 2020.
The “One Nation, One Gas Grid” goal pertains to the unification of several regional systems, thereby creating a national grid for supplying natural gas-generated energy to a variety of stakeholders, including the federal government, state governments and the public and private sectors.
India’s objectives include boosting the proportion of natural gas in the energy mix from 6.2 per cent to 15 per cent by 2030. The government announced an extension of the national gas grid from 17,500 km to 34,500 km. In addition, 450 km has already been added, bringing the total distance to almost 18,000 km. The remaining 16,000 km are projected to be completed in the next four to six years. Efforts have also been made in the last four years to connect eastern India to the north via the JHBDPL, a Pradhan Mantri Urja Ganga project that is nearing completion and would also add approximately 3,000 km to the grid. South India is also being considered, and is estimated to add approximately 1,500 km to the existing grid system.
The gas grid is projected to generate new demand centres and assist the development of green industrial corridors, which will result in the creation of employment opportunities. It encourages the use of compressed natural gas (CNG) and LNG in transportation, resulting in a reduction in urban pollution. It is the driving force behind the development of domestic gas fields, particularly isolated and small field development. It encourages the development of a gas-based economy and the expansion of pipeline connectivity and access throughout the country, as well as the provision of energy justice through the reduction of regional imbalances in gas availability.
Initiatives by GoI
The Government of India (GoI) has implemented several structural changes to transition to a gas-based economy, including the development of gas sources through domestic gas exploration and production activities or through the establishment of facilities for natural gas imports in the form of LNG. Gas pipeline infrastructure and secondary distribution networks will be developed and gas-consuming industries like fertiliser and power, the two largest consumers of gas in the Indian market, will be expanded. In financial year 2015-16, these two sectors accounted for nearly 60 per cent of the country’s total gas consumption. The government has created a Fertiliser Gas Pooling Scheme in order to stimulate the use of the country’s existing fertiliser units. On the power front, the government has proposed a scheme to restart stranded gas-fired power facilities using R-LNG. It aided in the revival of stranded power plants with a combined capacity of around 16,000 MW, preventing them from becoming non-operational. LNG usage in the power industry climbed from 3 mmscmd in April 2015 (pre-pooling) to a peak of 11.47 mmscmd in March 2016.
Additionally, the Indian government has launched the National Seismic Programme, the HELP policy, Pricing Guidelines (2014), Marketing and Pricing Freedom from Difficulties and New Fields, Discovered Small Field Policy, and Coal Bed Methane Policy to boost domestic gas production.
Among the initiatives taken to develop gas infrastructure are the completion of the national gas grid and the Northeast Gas Grid (Indradhanush Gas Grid Limited/IGGL), the award of capital grants to JHBDPL and IGGL, the construction of new LNG import facilities, the development of CGD networks, the promotion of bio-CNG (SATAT), and the use of gas in refineries and steel.
Improved market access and promotion of a free gas market are envisaged through initiatives such as the Gas Trading Exchange, an e-bidding platform, the establishment of a Transport System Operator Central Public Sector Enterprise (CPSE), tariff rationalisation, and the inclusion of gas under the goods and services tax (GST).
Normally, the government does not provide financial assistance for the construction of pipeline infrastructure. However, it has agreed to provide a capital grant of Rs. 51.76 billion (or 40 per cent of the estimated capital cost of Rs.129.4 billion) to GAIL for the development of the 2,539 km-long JHBDPL to connect the eastern part of the country to the National Gas Grid. During fiscal year 2015-16, the CPSEs invested around Rs 29.62 billion in the development of natural gas and pipeline infrastructure for other petroleum products.
Economic woes include delays in project completion and the fact that natural gas is not subject to GST. A fast-track system, extremely costly restoration and permission fees, non-uniformity in taxation between states and exclusion from GST, restricted models of factory-fitted CNG vehicles, and a scarcity of domestic gas are all downsides.
In the course of project implementation, the most significant challenges have been delays in right-of-way acquisition due to a lack of land records in some states, resistance from landowners and farmers in some regions of the country, and landowners demanding exorbitantly high prices for land and plots. Another issue is the slowdown caused by Covid-19 in the progress of pipeline projects. In southern India, the Kochi-Koottanad-Mangalore-Bangalore pipeline is experiencing delays in pipe unloading and construction activities as a consequence of opposition from farmers and labour unions. The project also requires the approval of the Tamil Nadu government.
While tremendous efforts are being made to attain clean, affordable and sustainable energy, there will be infrastructure-related and several other potential difficulties that must be addressed in order to alleviate energy poverty in the future, while also maintaining residents’ energy security.