Narendra Modi targets gas exchange to ease shift from oil

NEW DELHI (Reuters) - India is working to establish a natural gas trading exchange, Prime Minister Narendra Modi said on Thursday, as part of a shift away from a reliance on crude oil based products which are blamed for much of the country's pollution problem.

"We want to increase the use of natural gas by 2.5 times by the end of next decade," Modi said in New Delhi at the laying of a foundation stone for the setting up of city gas distribution (CGD) networks in 129 districts which have been auctioned.

India wants to develop a transparent market for natural gas where the price is determined on an exchange and aims to increase the use of natural gas in India's total energy mix from 6.5 percent to 15 percent between 2028 and 2030.

The price of making the switch has not been disclosed but analysts have often pointed out that using natural gas to fuel vehicles and households is cheaper than LPG and cleaner than petrol or diesel, which are causing pollution in India.

However, it is still hard to persuade people to switch to piped gas as LPG cylinders are well entrenched in India and the refuelling infrastructure for natural gas is minimal.

As well as uncertainty about the cost, there are also concerns about the length of time needed to install the infrastructure, which is expected to take two to three years.

Modi said India had begun the bidding process for a tenth round of CGD which will mean 400 districts or 70 percent of the country's population is covered in the next two to three years.

He said India is spending 130 billion rupees ($1.84 billion) to set up a pipeline that will connect eastern India where there is latent gas demand which has not been tapped because of a lack of infrastructure.

The pipeline network, along with liquefied natural gas (LNG) terminals being set up in the east coast and a CGD network are expected to help boost gas consumption.

($1 = 70.6700 Indian rupees)

(Reporting by Nidhi Verma and Promit Mukherjee; Editing by Alexander Smith)