As India seeks to raise the share of natural gas in the overall energy mix, there is a critical shift in the oil and gas sector’s trajectory, from a phase dominated by rapid infrastructure creation to one increasingly defined by utilisation, pricing stability, regulatory reform and consumer confidence. At a recent Indian Infrastructure conference, Pankaj Jain, former secretary, Ministry of Petroleum and Natural Gas, traced the significant progress achieved over the past decade, while drawing attention to the structural, regulatory and pricing challenges that now shape the sector’s future. Edited excerpts…
Expansion and completion of the core gas grid
India’s efforts to set up natural gas infrastructure span several decades, but the past 10 years represent an unprecedented transformation phase. Most of the infrastructure that defines today’s gas ecosystem has been created during this period. Almost all major trunk pipelines have been laid over the past decade except the historic Hazira-Vijaipur-Jagdishpur pipeline, which predates the recent expansion. India has a gas pipeline network of around 33,000 kilometres of trunk pipelines, forming the backbone of the national gas grid.
At present, liquefied natural gas (LNG) regasification terminals operate at a capacity of over 52 million metric tonnes per annum, enabling India to access global gas markets at scale. At the same time, city gas distribution has grown exponentially, from coverage in just 34 geographical areas to the current near-national reach. Distribution pipelines now extend to nearly 500,000 inch-kilometres and continue to expand, supported by a rapidly growing network of compressed natural gas (CNG) stations serving urban transport and commercial users.
Utilisation, reliability and access versus competition
As gas infrastructure becomes central to everyday life, its reliability assumes critical importance. A major incident that highlighted this importance is the recent CNG supply disruptions to Mahanagar Gas Limited in Mumbai, where the failure of GAIL’s main pipeline feeding the city gas network led to widespread hardship for households, transport operators and commercial kitchens dependent entirely on natural gas. Such incidents underline how gas infrastructure has evolved from a supplementary energy source into a critical public utility.
This reality brings the issue of redundancy to the forefront. Building a resilient gas system requires parallel routes and backup supply arrangements, but these involve significant capital costs. The challenge lies in addressing redundancy without imposing any undue financial burden on end consumers.
At the same time, the sector faces a paradox of uneven utilisation. While some pipelines operate as critical lifelines with little spare capacity, others struggle with low throughput and underutilisation. This imbalance raises difficult questions about tariff structures, investment planning and network optimisation. It also feeds into a deeper structural issue of the tension between open access and competitive advantage.
Pricing dynamics, LNG capacity and role of GST reform
Price is the single most material variable influencing gas demand and infrastructure utilisation. In India, gas consumption is highly price-sensitive, particularly in the power sector, where demand can fluctuate sharply depending on despatch requirements and weather conditions.
Globally, the gas market is entering a phase with significant gas production and several projects maturing, potentially leading to a surplus. While this could translate into better prices, it will be incorrect to assume that such outcomes are either certain or imminent. These pricing dynamics also influence perceptions around overcapacity of LNG terminals. If global gas prices decline meaningfully, India could witness a huge uptake in utilisation of these terminals, quickly absorbing spare capacity because downstream distribution infrastructure is largely in place.
Overlaying all these issues is the most important pending reform in the gas sector, the inclusion of natural gas under the goods and services tax (GST) framework. The absence of GST has far-reaching implications.
Domestic production and managing market volatility
Policy reforms following the 2023 committee report have helped anchor price expectations and improve incentives for upstream investment. Meanwhile, India’s dependence on imported gas means exposure to global price volatility is unavoidable. No country controls international commodity prices, whether for gas, crude oil or coal. India, like others, is also a price taker. The role of policy, therefore, is not to control prices but to anchor expectations and help stakeholders manage volatility.
(These remarks were made by
Mr Pankaj Jain during his tenure as Secretary, Ministry of Petroleum and Natural Gas.)
