Gas-Based Economy

A gas-based economy means a country where natural gas supplies a large share of the energy used by homes, vehicles, factories and power plants. India has set a target to raise natural gas to 15% of its primary energy mix by 2030, from about 6-7% now. Natural gas is a fossil fuel, but it burns much more cleanly than coal or oil.

So India sees it as a "bridge fuel": a cleaner fuel to use while the country slowly moves to renewable energy like solar and wind.

What is natural gas?

Natural gas is a fuel found deep under the ground or under the sea, often near oil. It is mostly methane (CH4), the simplest hydrocarbon. It has no colour and no smell. A smelly chemical is added to the gas supplied to homes, so that people can notice a leak. It is used in four main forms:

• Piped Natural Gas (PNG): gas sent through pipes to kitchens and factories.
• Compressed Natural Gas (CNG): gas squeezed under high pressure into cylinders, used in vehicles.
• Liquefied Natural Gas (LNG): gas cooled to about minus 162°C until it becomes a liquid. It takes about 600 times less space, so it can be carried by ship across oceans.
• Raw material: gas used to make urea fertiliser and petrochemicals.

Why does India want more gas?

India depends heavily on coal for electricity and on imported oil for transport. Both cause high pollution. Natural gas emits roughly half the carbon dioxide of coal when burnt for power, and almost no soot, sulphur dioxide or ash. So more gas means cleaner city air and lower carbon emissions. Gas is also flexible. A gas power plant can be switched on and off quickly, which helps balance the grid when solar and wind power rise and fall. Think of it like a reserve player who can come on the field at short notice.

Where did the target come from?

India has used natural gas since the discovery of gas fields in Assam and the offshore Bombay High field in the 1970s. The country's first long-distance gas pipeline, the Hazira-Vijaipur-Jagdishpur (HVJ) pipeline, about 1,750 km long, was commissioned by GAIL in 1987, mainly to supply gas to fertiliser plants. The goal of a gas-based economy, and the 15% share by 2030 target, became official policy in the 2010s.

The government has repeated it in Parliament many times since 2021. As of December 2023, gas had a 6.7% share of India's energy basket.

How does India's gas system work?

The gas supply chain has three parts, often called upstream, midstream and downstream:

1. Upstream (finding and producing gas): Companies like ONGC and Oil India explore and produce gas. Since 2016, blocks are given out under the Hydrocarbon Exploration and Licensing Policy (HELP), which lets companies pick areas they want through the Open Acreage Licensing Policy (OALP).
2. Midstream (bringing gas in and moving it): Imported LNG arrives by ship at LNG terminals, where it is turned back into gas (this is called regasification). Long pipelines then carry the gas across the country. The Pradhan Mantri Urja Ganga project (Jagdishpur-Haldia-Bokaro-Dhamra pipeline), launched on 24 October 2016, takes gas to eastern India. The bigger plan to link all regions is called One Nation One Gas Grid.
3. Downstream (selling to users): City Gas Distribution (CGD) companies supply PNG to homes and CNG to vehicles within a Geographical Area (GA). Fertiliser plants, power plants and refineries buy gas directly.

Who regulates it?

The Petroleum and Natural Gas Regulatory Board (PNGRB), set up under the PNGRB Act, 2006, regulates the midstream and downstream parts. It gives licences for CGD in each Geographical Area through bidding rounds, sets pipeline tariffs (the fee for carrying gas) and protects consumers. After the 12th CGD bidding round, almost the whole country except the islands is covered by authorised CGD areas. The Ministry of Petroleum and Natural Gas makes policy, and the Petroleum Planning and Analysis Cell (PPAC) collects data.

How is gas priced?

Gas produced from old fields of ONGC and Oil India is called APM gas (Administered Pricing Mechanism gas). It is mainly used for CNG and household PNG. In April 2023, the Union Cabinet accepted the formula suggested by the Kirit Parikh Committee:

• APM gas is priced at 10% of the Indian crude basket price (the average price of crude oil India imports).
• It has a floor of $4 and a ceiling of $6.5 per MMBTU.
• The price is now set every month instead of every six months.

This was done to protect households and vehicle owners from sudden price jumps. Gas from difficult fields (deep sea, high pressure) gets more pricing freedom to attract investment.

The key numbers

These facts are commonly asked:

• Target: 15% gas in the primary energy mix by 2030; current share about 6-7%.
• Import dependence: In 2023-24, India used a record 68 billion cubic metres (bcm) of gas. About 47% of it was imported as LNG. Domestic production is about 36 bcm a year.
• Biggest user: The fertiliser sector uses about 30% of India's gas, mainly to make urea. CGD, power and refineries follow.
• Pipelines: Operational gas pipelines grew from 15,340 km in 2014 to 24,945 km by September 2024, with about 10,805 km more under construction.
• LNG terminals: India has about seven operating LNG terminals. The largest is Dahej in Gujarat, run by Petronet LNG, with a capacity of 17.5 million tonnes per year. Others include Hazira, Dabhol, Kochi, Mundra, Ennore and Chhara.
• Gas trading: The Indian Gas Exchange (IGX), India's first nationwide online delivery-based gas trading platform, was launched on 15 June 2020.
• Tax: Natural gas is one of five petroleum products kept outside GST under Article 279A(5) of the Constitution (with crude oil, petrol, diesel and aviation turbine fuel). The GST Council has to recommend a date to bring it in. Until then, central excise duty and state VAT apply.

Where does CBG fit in?

Compressed biogas is almost the same as natural gas, but it is made from waste, not dug out of the ground. So it is renewable and domestic. Every unit of CBG mixed into city gas pipelines replaces a unit of imported LNG. This is why biogas schemes like SATAT and GOBARdhan are counted as part of the gas-based economy plan.

Commonly confused concepts

• LNG vs CNG vs LPG: LNG is natural gas made liquid by cooling, for shipping. CNG is natural gas compressed as a gas, for vehicles. LPG (Liquefied Petroleum Gas, the red kitchen cylinder) is a different fuel, mainly propane and butane, which comes from refining crude oil or processing gas.
• Natural gas vs biogas vs CBG: Natural gas is a fossil fuel formed over millions of years. Raw biogas is made from waste in weeks and has only about 55-60% methane, with the rest mostly carbon dioxide. CBG is biogas cleaned to at least 90% methane (the Indian Standard IS 16087) and compressed, so it can replace CNG.
• Primary energy mix vs electricity mix: The 15% target is for the primary energy mix, meaning all energy the country uses (for cooking, transport, industry and power). It is not the share of gas in electricity alone.
• APM gas vs market-priced gas: APM gas comes from older nominated fields and has a government-fixed price band. Gas from new difficult fields and imported LNG are priced closer to market rates.
• PNGRB vs DGH: PNGRB regulates pipelines, CGD and marketing (midstream and downstream). The Directorate General of Hydrocarbons (DGH) oversees exploration and production (upstream).

Issues, criticism and the way forward

• The target may be missed: The share has stayed around 6-7% for years. Industry experts have said reaching 15% by 2030 will be very hard; even 10% would be a big achievement.
• Import dependence: Nearly half of India's gas is imported, and a large part comes from Qatar. Wars or shipping disruptions in West Asia raise prices and risk supplies.
• Price sensitivity: Indian users, especially fertiliser and power plants, find costly LNG hard to afford. When global prices jump, gas power plants sit idle.
• Infrastructure gaps: Many pipelines and CGD networks are still being built. The east and north-east joined the grid late.
• Outside GST: Because gas is outside GST, businesses cannot claim tax credit for it, which makes gas costlier than it needs to be. Industry has long asked to bring it under GST.
• Climate debate: Critics point out that methane leaks during production and transport can reduce gas's climate advantage, because methane traps far more heat than CO2 in the short term.
• Way forward: Experts suggest raising domestic production through HELP, finishing the national gas grid, bringing gas under GST, signing long-term LNG contracts with many suppliers, and scaling up CBG, which reduces imports and handles waste at the same time.

Concepts to Know

• Primary energy mix (energy basket): The share of each source (coal, oil, gas, renewables, nuclear) in all the energy a country uses.
• Bridge fuel: A fuel that is cleaner than coal and oil, used for some decades while the country shifts to renewable energy.
• MMBTU: Million British thermal units, a unit used to measure the energy content of gas. Gas prices are quoted per MMBTU.
• mmscmd and bcm: Million standard cubic metres per day, and billion cubic metres. Both measure the volume of gas.
• Regasification: Warming LNG at a terminal so that it turns back into gas and can enter pipelines.
• Geographical Area (GA): A district or group of districts for which PNGRB gives one company the right to build a city gas network.
• Indian crude basket: The average price of the types of crude oil India imports, used as a reference for pricing.