The Government of India has a vision to increase the share of natural gas in the primary energy mix from 6 per cent to 15 per cent by 2030. The objective is to diversify primary energy sources and reduce dependence on polluting fossil-based fuels. A gas-based economy is expected to contribute towards achieving net zero by 2070 by reducing emissions intensity by 45 per cent and total carbon emissions by 1 billion metric tonnes by 2030, as per India’s climate action commitments.
As per recent estimates, India emitted around 3.4 giga tonnes of carbon dioxide equivalent. One-third of these emissions were on account of electricity generation and heat production, while around one-fourth were contributed by the manufacturing and transportation sectors. Although India’s per capita emissions are significantly lower than those of the top 10 emitters, the country’s emissions are bound to increase in a business-as-usual scenario. In line with its mission of a gas-based economy, the government has taken several enabling initiatives, including:
- Facilitating the rapid growth of city gas distribution (CGD) infrastructure
- Stabilising the prices of administered price mechanism (APM) for PNG/CNG consumers
- Incentivising non-APM sources (hard-to-drill) through differentiated pricing
- Improving the exploration and licensing policy to increase domestic production
- Incentivising compressed bio-gas production
- Introducing a unified pipeline tariff
- Developing a national gas grid
- Setting up a Hydrogen Mission Directorate, etc.
As of March 2023, following the conclusion of the eleventh bidding round, access to gas has been extended to 88 per cent of the country’s geography and 98 per cent of its population. The common carrier national gas pipeline network spans 21,921 km of operational/partially commissioned pipelines, with another 12,002 km under construction. The CGD industry has set up 5,830 CNG stations and connected over 11 million PNG customers, supplying 60 BCM of gas. Nearly 47 per cent of the required gas is imported, supported by LNG terminals with a combined capacity of 47.7 mtpa across six port locations, and a utilisation of around 50 per cent.
Despite the support, the share of natural gas in India’s energy basket stood at 5.8 per cent in 2022. Undisputedly, there is a need for a consistent double-digit CAGR in natural gas usage. The demand for natural gas grew at a CAGR of 3.2 per cent between 2014-15 and 2021-22. To facilitate this growth, more policy reforms will be needed.
In April 2023, the government made a landmark decision by capping the supply price of natural gas to PNG homes and CNG vehicles while also setting the floor price to protect the economic interest of gas producers. The government has also set both ceiling and floor prices for high pressure and high temperature gas exploration in India.
The two key sectors, transport and industrial, which account for nearly 60 per cent of total energy use, utilise natural gas for less than 6 per cent of their energy needs. Instead, they rely on coal, liquid fossil fuels and firewood, all of which are significant contributors to pollution.
While CNG has become the preferred fuel for light motor vehicles and city buses, its adoption in heavy-duty and long-haul transportation has been limited due to its lower energy density compared to liquid fuels like diesel. A potential solution is the adoption of LNG since it can overcome this challenge easily, as evident in China and Europe where LNG trucks and buses have been operating successfully for nearly a decade.
The recently published recommendations by the Energy Transition Advisory Committee of the Ministry of Petroleum and Natural Gas highlight the need for promoting the use of LNG in medium and heavy commercial vehicles to reduce tank-to-wheel carbon emissions. Further, it is essential to ensure short to mid-term pricing stability in LNG retailing for the transport sector as both price stability and availability are key considerations. A stable LNG pricing regime, supported by a small volume of gas allocation for around three years and the rationalisation of high GST rates on the conversion of heavy vehicles from high-speed diesel to LNG, will provide fleet owners confidence to invest in clean fuel and deploy LNG trucks. A stable mid- to long-term demand for LNG vehicles would also incentivise original equipment manufacturers to launch LNG based models and invest in manufacturing capacities.
Financial and non-financial support may also be considered for fast-tracking the development of the LNG ecosystem. Schemes similar to FAME for electric vehicles could provide the necessary impetus to the conversion of existing vehicles to CNG and LNG.
The use of natural gas in industrial sectors can be encouraged by offering incentives for conversion, improving the ease of doing business and ensuring price stability. Natural gas remains outside the GST ambit, which makes it less competitive as compared to other fuels like coal and LPG, which fall within the GST framework.
In conclusion, natural gas has a key role to play in India’s energy transition roadmap. The continued implementation of reforms by the government, regulatory bodies and other authorities will be instrumental in achieving a 15 per cent share of natural gas by 2030, which otherwise seems a tall order to achieve.