Pradhan says pipeline tariff rationalisation, gas pricing freedom on anvil

India plans to gradually introduce pricing and marketing freedom for natural gas as well as rationalise pipeline tariffs to help push for a greater share of the environment-friendly fuel in the energy basket, Oil Minister Dharmendra Pradhan said on Wednesday.

While he did not spell out the roadmap for freeing gas prices, Pradhan said the current practice of fixing zonal tariffs of a gas pipeline, which typically rises as the gas travels from source to consumption centres, will be replaced by uniform rates.

"With a view to further facilitate a conducive business environment for competitive gas markets, efforts are underway to rationalise gas pipeline tariff structure for improving the affordability of gas across the country and for attracting investments into the gas infrastructure," an official statement quoted him as saying at International Energy Agency's (IEA) webinar on 'Building a Natural Gas Based Economy in India'.

The present zonal tariff structure, he said, results in additive tariffs for usage of multiple pipelines to transport natural gas from distant gas supply sources.

"It causes a wide disparity in pipeline tariffs particularly for the buyers located distant from the gas sources and thus it hinders the development of new gas markets/demand centres in far-flung and remote areas," he said.

To create a level playing field among gas consumers located in far/remote areas, the existing zonal tariff structure is currently being reviewed to make it rational and competitive, Pradhan said.

The new tariff structure would facilitate in creating a single gas market by attracting investment to complete the gas grid as well as ensuring equitable access to natural gas across the country, he said, adding that gas-based industries would benefit with new tariff structure which would improve affordability across the country.

A simplified tariff structure would also encourage gas industries to utilise the opportunity of procuring their gas requirement through gas trading exchange platforms based on market mechanisms.

"A level playing field among industries would promote in minimizing their input cost and improve competitiveness in the global production chain," he said. "Apart from industries, new rationalised tariff structure would also give a boost for expeditious development of city gas projects and piped natural gas/CNG services to the citizens."

Pradhan said India is all set to emerge as one of the primary drivers of growth in gas demand in Asia, despite the pressing Covid-19 challenges.

He said in order to give a fillip to gas-based economy, the focus is on enhancing domestic gas production, expeditious development of gas infrastructure as well as development of gas market by providing open access to gas infrastructure.

India is targeting to raise the share of natural gas in energy basket to 15 per cent by 2030 from the current 6.2 per cent.

On creation of free gas market, the minister said that "the government is progressively moving towards a marketing and pricing freedom regime in the country. The gas grid is being expanded to new markets in the eastern and north-eastern parts of the country.