Gas grid to be expanded to 27,000 km, pricing reforms in offing

Finance Minister Nirmala Sitharaman on Saturday laid down plans for expansion of national natural gas pipeline network to 27,000 km from the present 16,200 km and pricing reforms as the government looks at boosting use of environment friendly fuel.

The government has set a target of raising the share of natural gas in primary energy basket to 15 per cent by 2030 from current 6.2 per cent. Connecting gas sources to consumption hubs is a key to achieving this.

Presently, most of the gas pipelines are concentrated in the western and northern part of the country with a few lines in the east and south.

In her speech while presenting the Budget for 2020-21, Sitharaman said more gas pricing reforms are in the offing.

"To deepen gas markets in India, further reforms will be undertaken to facilitate transparent price discovery and ease of transactions," she said.

Presently, the price of natural gas produced domestically is fixed by a formula that averages out rates in gas surplus nations such as Russia and the US.

"Further, it is proposed to expand the national gas grid from the present 16,200 km to 27,000 km," she said without giving a timeline.

Oil Minister Dharmendra Pradhan said the Budet lays emphasis on creating next generation financial markets, boosting income and investment and several infrastructural reforms for accelerated economic growth.

Commenting on the Budget, Nitin Prasad, Chairman, Shell Companies in India said, "The policy reforms announced in the Union Budget by the Finance Minister sustain the Prime Minister's vision for India's journey towards a climate resilient and clean energy society under pinned on electro-mobility, a gas based economy and renewable power delivered through accelerating innovation from start-ups."
Raju Kumar, Tax Partner, Oil & Gas practice, EY India said the budget announcement of planned increase in natural gas pipeline network and plan to facilitate transparency in price discovery is likely to strengthen the natural gas market in India. "This will also support further expansion of city gas distribution."
"As conventional hydrocarbon resources are dwindling and new resource accretions are few and far between, unconventional hydrocarbons, like CBM (as an established source) and Shale Gas (in the long run) will assume greater significance," he said