It is also important to regulate and reduce the prices of imported natural gas in order to accelerate our 2030 decarbonisation pathway
The Union Cabinet approved the revised domestic natural gas pricing guidelines on April 6, 2023. The new pricing regime mainly applies to gas produced from nomination fields of national oil companies Oil and Natural Gas Corporation (ONGC) Ltd and Oil India Ltd (OIL).
The new guidelines are intended to ensure a stable pricing regime for domestic gas consumers, according to a statement from the Union Ministry of Petroleum and Natural Gas (MOP&NG). However, it won’t be beneficial for almost 45% of India’s gas consumers.
There will be monthly notifications to ensure stable pricing in the regime, and the price of natural gas will be 10 per cent of the monthly average of the Indian crude basket, the ministry said.
“For the gas produced by ONGC and OIL from their nomination blocks, Administered Price Mechanism (APM), price shall be subject to a floor and a ceiling,” it added.
The government also pitched to increase the share of natural gas in India’s primary energy mix from the current 6.5 per cent to 15 per cent by 2030. The reform may help India expand the consumption of natural gas and contribute to achieving the country’s emission reduction targets and becoming Net Zero.
But the price reduction is currently concerned with only 55 per cent of the natural gas used in the country and the price of the rest 45 per cent of the gas remains unchanged since it is imported. This might not benefit the areas where the imported gas is used majorly.
The pathway to achieving India’s decarbonisation targets via natural gas will be driven fast by reducing the price of gas procured from all sources, as suggested by the Delhi-based non-profit organisation Centre for Science and Environment (CSE).
CSE recently analysed the challenges to cleaner fuel usage in industries of Delhi- National Capital Region (NCR). The study found a considerable increase in natural gas prices over the past few years due to Russia-Ukraine war.
The cost of piped natural gas (PNG) went up to Rs 52 per standard cubic metre (scm) in early 2023, which was even higher in December 2022, while it was only Rs 24 / scm in 2021. This led the PNG-consuming industries of the Alwar district in Rajasthan (which falls under Delhi-NCR) to shift towards alternate cleaner fuels. Though these industries had spent over Rs 1 crore to shift from coal / pet coke to PNG, they are further shifting to other sources.
PNG consumption in Ahmedabad has declined by 37 per cent on average, according to sources.
The key players like Gujarat Gas Ltd reported a 51 per cent decline in industrial PNG volume in the third quarter of 2022-23 against the corresponding quarter and Adani Total Gas reported a 23 per cent decline. So, the price reduction of domestically produced gas might not be effective here since Gujarat is majorly dependent on imported natural gas.
The CSE report observed that industries were adopting different strategies to combat the PNG price hike, which are as follows:
Though such steps and initiatives are helpful to a certain extent and only for certain areas, they are not enough to compete with cheaper ‘dirty’ fuels. It was also noticed that some of the small-scale industries were voluntarily forced to shut down or relocate due to a hike in gas prices.
In light of the new gas pricing guidelines, CSE suggests it is also important to regulate and reduce the prices of imported natural gas in order to meet its decarbonisation goals by 2030.
“One of the best ways to reduce prices is by bringing natural gas under the Goods and Service Tax regime to save it from the multiple layers of state taxation it goes through before reaching the domestic or industrial consumers,” said Parth Kumar, programme manager, Industrial Pollution, CSE.
Apart from this, over 64 per cent of the PNG is used for meeting energy needs in 2021-22 and the remaining is used as a feedstock (non-energy use) in industries such as fertiliser, petrochemical and sponge iron, according to MOP&NG.
This emphasises that PNG is not just important as a fuel but is critical in various industrial processes as well. Thus, it is a significant transition player, fuelling industries towards cleaner alternatives in this decade. It can also help us switch to cleaner fuels like hydrogen as they become affordable in the long run.
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