New Exchange: India’s first gas trading platform

India’s first gas trading platform

Indian Energy Exchange Limited (IEX) is the largest energy exchange providing a nationwide automated trading platform for the physical delivery of electricity. The IEX has been successfully operating for the past 13 years, with the largest share among power exchange suppliers. In 2020, it launched India’s first national gas exchan­ge, the Indian Gas Exchange (IGX). The IGX is an automated national-level online trading platform where natural gas is traded and transported/delivered through a market-based pricing mechanism. It operates under the Pet­ro­leum and Natural Gas Regulatory Board (PNGRB) with a strong governance structure and surveillance mechanism as per the provisions of the PNGRB (Gas Exchange) Regulations, 2020.

Key developments

  • In August 2021, the IGX commenced gas trade from two new hubs at Dabhol and Jaigarh in Ma­ha­rashtra. The IGX witnessed an increase in both volume and participation.
  • In January 2022, Indian Oil Corporation Limi­ted (IOCL) joined the IGX as a strategic partner with 4.93 per cent equity stake.
  • On the regulatory front, in the 11th city gas distribution bidding round, bids were received for 61 geographical areas (GAs) out of 65, from 26 bidders, by December 15, 2021. The PNGRB approved the issuance of letters of in­tent for 13 entities against 52 GAs on Janu­ary 27, 2022.
  • The average gas price discovered at the IGX during January 2022 was Rs 2,080 ($27.7) per MMBTU while the average international spot gas price remained at around $35 per MMBTU. The price discovered on the exchan­ge has been truly reflective of the Indian de­mand and supply scenario of natural gas and has ably captured the LNG long-term, spot and domestic gas pricing well.

Governance structure

The IGX has standardised the market rules and by-laws. The byelaws contain the essential rul­es for the organisation of the IGX, the tasks of its comm­it­tees/bodies as well as the preconditions for ac­cess to trading. The circulars contain the IGX’s communication to its members and clients. The ma­rket rules govern the day-to-day operations of the IGX, the rules of trading, and the relationship between the IGX and its members/clients. Con­tract specifications are part of the market rules, which include rules regarding the execution of trading, parti­cularly tra­ding forms, order types and execution of orders.

Market model: Contractual arrangement

The IGX has signed an umbrella gas transportation agreement (GTA) with transporters to facilitate gas deliveries up to the consumption facility if the buyer does not have a GTA with the tra­n­s­porter. Buyers that have a GTA in place with the transporter have the option of ex-hub transaction, wherein the buyers will buy the gas from the IGX and will take care of deliveries. The IGX’s trading mechanism is based on an open, un­i­form price, and double-sided auction app­roach for price discovery. In a double-sided open auction, both sellers and buyers submit their bids and the bid price and quantity are visible to the market participants without disclosing the identity of the bidder. The auction re­sults in the discovery of a single uniform clearing price for each contract type. The price discovered on the exchange on a particular hub for a particular contract is applicable to all the participants uniformly.

The advantage of this mechanism is that whenever the trade is successful, buyers will get the gas at a price equal to or lower than the bid price. The primary goal of such auctions is to ensure increased competitiveness. The IGX aggregates all the offers from sellers and bids from buyers to clear the market based on the su­pply-demand equilibrium concept. The intersection point of the supply and demand curves will determine the market clearing price and mar­ket clearing volume. Besides the double-sided auction approach, the IGX offers continuous trade in daily contracts to fulfil the energy requirement based on parameters that can be customised to meet consumers’ needs.

Salient features

The platform allows trade for firm delivery on non-transferrable basis for quantities as low as 50 MMBTU, with no upper limit. The gas traded on the IGX platform flows from the same existing pipeline and metering systems. The IGX operates on the basis of physical trading hubs. At present, five trading hubs are operational, namely, Dahej, Hazira, the KG basin, Dabhol and Jaigarh, for the ph­y­sical delivery of natural gas. At the IGX, natural gas is traded on gas hubs where multiple buyers and sellers submit their most competitive price bids along with their volume requirement. The IGX has also applied for two additional hubs, one each in Uttarakhand and Haryana.

Trading details

The IGX traded about 531,650 MMBTU of gas in December 2021. A total of 20 members and over 500 clients are registered on the IGX platform. After receiving authorisation from the PNGRB, consistent growth in trade at the gas exchange can be observed at a very competitive price.  It is also observed that IGX prices are mostly lower than spot and long-term LNG prices. Recently, there have been slight changes because of the sharp increase in spot prices.


The IGX provides an end-to end solution for gas buying and selling on the exchange. The benefits for sellers include increased liquidity, wider gas market participation, flexible contracts, advance payments, and a gas price benchmark based on local demand-supply dynamics. Also, the IGX provides competitive pricing, equal opportunity, and flexibility, and facilitates delivered transactions. Key enablers are uniform taxation, an uniform transmission tariff, and an independent system operators, among others.

IGX has been achieving consistent growth in terms of volumes as well as ecosystem development. Going forward, there are plans to launch state-wise trading hubs based on demand centres and new trading hubs for domestic gas with marketing and pricing freedom. Know-your-customer-related clauses are planned to be incorporated in the IGX market rules and by-laws to enrol international sellers. Further, there are plans to introduce long-duration contracts.

Based on a presentation by Sushil Kumar Mishra, Assistant Vice President, Business Development and Advocacy, IGX, at a recent India Infrastructure conference