The government is planning to introduce a wave of reforms in the natural gas sector, aimed at local discovery of prices and development of a national gas market.
The oil ministry has prepared a Cabinet note that proposes snapping the power sector’s priority access to cheap local gas, setting up a gas trading platform to encourage market-discovery of prices, and hive off GAIL’s transportation unit to enhance third party access to its pipelines.
At present, India produces just half of the gas it consumes, a government set formula determines rates for most local gas, and the absence of market price deters producers from investing in the country. By allowing marketing freedom to gas from new discoveries, the government has tried to address much of the investors’ concerns in recent years but officials think developing a free market was essential to sustained investment in the sector.
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Which is why the government wants to build a gas trading platform that can facilitate market discovery of prices. A gas exchange will enhance trade transparency, boost consumer confidence, and increase market opportunities for suppliers, officials said.
