India has set an ambitious target of becoming a natural gas-based economy by increasing its share to 15 per cent in the primary energy mix by 2030. Historically, India and other countries have faced high gas prices. As far as the Indian natural gas market is concerned, it is mired in three specific challenges, namely, lack of pipeline infrastructure to transfer natural gas to major demand centres, while unlocking the latent demand; lack of the mandated domestic gas allocation policy for priority sectors; and the absence of regulated wellhead prices of domestic gas production. The gas allocation policy of India classifies consumer sectors in two tiers. Tier one includes priority sectors such as the city gas distribution (CGD) sector for piped natural gas (PNG, domestic) and compressed natural gas (CNG, transport), fertiliser, power, LPG, etc. which receive the larger share of cheaper domestic gas. In contrast, tier two sectors have to rely on expensive LNG. The prioritisation is based on either the price-sensitive nature of consumers or because this fuel has been recommended as a solution to a long-term problem.  Going forward, planned investments towards establishing ‘one nation one gas grid’ indicate the government’s commitment to building a gas-based economy. Further, considering the fast adoption of LNG in India, the focus on LNG infrastructure has become as important as that of the national gas grid.

The working paper titled, ‘India’s Natural Gas Future Amid Changing Global Energy Dynamics’ by Council on Energy, Environment and Water aims to highlight how natural gas penetration will evolve across different sectors including CGD, whether high gas penetration would hamper India’s progress towards becoming a low carbon economy, and what are some of the monetary and non-monetary benefits of high gas penetration in the country.