India’s ever-growing population has increased the demand for natural gas. Statistics and reports show that India’s energy consumption has doubled since 2000. And there is potential for further rapid growth.
International organizations such as the Energy Information Administration (EIA) of the USA and International Energy Agency (IEA) have made demand projections of natural gas in India. As per a report, India Energy Outlook by IEA, “energy is central to achieving India’s development ambitions”.
The report states that India’s links with the international energy system will deepen. “This will intensify India’s dependence and influence on international markets, through trade, investment, and clean technology cooperation.”
According to a report, ‘Vision 2030’ by the Petroleum & Natural Gas Regulatory Board (PNGRB), the higher availability of natural gas has pushed up its demand. “It is also because of the environment-friendly characteristics of natural gas as a fuel and the overall favorable economics of supplying gas at reasonable prices to end consumers.”
Power and fertilizer sectors are the two biggest contributors to the demand for natural gas.
The demand for industrial energy has doubled. So has, for transport. Though small, the demand for energy is also being felt by the agriculture sector; farmers use electric pumps for irrigation purposes.
The IEA report says, “elevated end-use industrial tariffs, allied to unreliable supply, lead many industrial and commercial consumers to produce their own electricity, they use backup diesel generators or large plants.”
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Also highlighted is the fact that 20 percent of the population, that is about 240 million people, are without electricity.
Factors Affecting Energy Development
India’s natural gas market lacks depth. This is attributed to the small number of producers who are still controlled by the state players, negligible number of shippers and a limited number of consumers. The market is also limited in terms of bilateral contracts between producers/marketers and consumers of natural gas.
A clear vision of India’s energy sector is difficult to achieve because of the complex institutional workings. Another major factor is the relationship between income levels, energy prices, and energy expenditure. IEA’s report says location also affected the level of consumption and the fuel choice. “The expenditure pattern across the income groups reflects an increase in energy consumption as people become more affluent, and a switch in fuels, away from bio-energy and kerosene and towards LPG and electricity.”
Pricing is also a major concern. In the years 2010 and 2014 respectively, the prices had been deregulated. “Successive governments had ensured that electricity and natural gas prices reflected the market realities.”
Reports have observed that policy and investment decisions are very much influenced by the sensitivity of water and land. Another major concern is pollution; air quality is affected in India’s major metropolitan cities.
What Can Be Done?
Strenuous effort is needed to remove investment and energy supply obstacles to make India energy efficient. Policy level initiatives can only boost the energy sector.
A trading platform should be set up for the consumers’ benefit. According to PNGRB’s Vision 2030 report, such a platform can also “discover prices and create sufficient depth in the Indian natural gas market.” Doing so would bring about investment and enhance the gas infrastructure as well.