The country is working towards increasing the share of natural gas in the energy mix from the current level of 6.3 per cent to around 15 per cent by 2030. The global average share of natural gas in the energy mix currently stands at 24 per cent. A major requirement for increasing natural gas demand is the development of a nationwide pipeline transmission network. To this end, the sector is working towards building a trunk network to connect the entire country. Currently, around 18,500 km of trunk pipeline has been laid as against the target of 34,000 km. The remaining network is expected to be completed over the next four to six years, with work progressing in full swing and a certain portion of pipeline getting commissioned every month.
The distribution work is also progressing at a steady pace as 53 per cent of the country’s geographical area has already been tendered out. City gas distribution (CGD) entities are developing their authorised geographical areas. Over the next few years, all urban areas of the country are expected to be connected to the CGD network. The rural areas will also come under the ambit of the CGD network in the next decade or so.
Gas infrastructure in the country is concentrated in the western and northern regions. The government is now focusing on expanding the network in the eastern and southern parts of India, with over 8,000 km of pipeline being executed by GAIL India Limited. It is also imperative to develop a national gas grid for the growth of the gas sector. However, the development of a pipeline infrastructure attracts limited participation due to its huge upfront investment costs and low returns. Although the government has given special attention to gas infrastructure development across the country, the progress remains slow.
Currently, the majority share (72 per cent) of the pipeline network belongs to GAIL (India) Limited. Nearly 50 per cent of the pipeline network under construction is also being developed by GAIL (India) Limited.
Recent developments in pipeline infrastructure
The CGD sector in India is currently working towards developing infrastructure, and streamlining rules and regulations to ensure that the services reach consumers in an efficient manner. Currently, 7.5 million households in the
country have been provided with piped natural gas (PNG) connections, while the number of households using liquefied petroleum gas (LPG) stands at around 290 million. Hence, there is immense scope for the growth in the CGD sector.
The central government has planned an investment of $66 billion in gas infrastructure. This investment will be used for the development of liquefied natural gas (LNG) regasification terminals, construction of pipelines and expansion of the CGD network.
The government has planned to expand the pipeline network from the current 18,500 km to nearly 34,000 km over the next four to six years. The development of a national gas grid is crucial for India, as it will support the government’s plan of establishing a gas-based economy. The pipeline grid will not only help in improving access to clean energy, but will also facilitate the development of city gas projects.
Of the 16,600 km of gas pipelines under construction, the key projects are the Jagdishpur-Haldia and Bokaro-Dhamra pipeline (JHBDPL); the Baruni-Guwahati pipeline (BGPL); the Dhamra-Haldia pipeline; the Vijaipur-Auraiya pipeline; the Sultanpur-Jhajjar-Hissar section of the Chainsa-Jhajjar-Hissar natural gas pipeline; the Haridwar-Rishikesh-Dehradun section of the Dadri-Bawana-Nangal pipeline; the Srikakulam-Angul pipeline; the Mumbai-Nagpur-Jharsuguda pipeline; the Northeast gas grid; the Kakinada-Vizag-Srikakulam pipeline; the
Ennore-Thiruvallur-Bengaluru-Puducherry-Nagapattinam-Madurai-Tuticorin pipeline; and the Nellore-Vizag-Kakinada pipeline.
The ongoing JHBDPL and BGPL projects are expected to increase gas consumption in the eastern parts of the country. The JHBDPL has a length of around 2,655 km, while the BGPL has a length of 729 km. The JHBDPL project has been divided into five sections: Section 1 (753 km), which runs from Phulpur Dobhi to Bihar, Gorakhpur and Varanasi; Section 2A (400 km), consisting of the Dhamra-Angul pipeline and spur lines to Paradip, Bhubaneswar and Cuttack; Section 2B (500 km), consisting of the Dobhi-Durgapur pipeline along with a spur line to Matix, Jamshedpur and Sindri; Section 3A (667 km), running between Bokaro and Angul; and Section 3B (335 km), consisting of the Durgapur-Haldia pipeline along with a spur line to Kolkata.
Currently, construction work on Section 2A is in progress and is expected to be completed by December 2021. Further, the work for laying the pipeline is under way for Section 3A and tenders have been invited for Section 3B. Tenders for all sections of the BGPL project have been awarded, and construction work is in progress.
Significant progress has been made in developing a pipeline infrastructure in the southern region of the country as well. The 450 km long Kochi-Koottanad-Bengaluru-Mangaluru pipeline was commissioned in November 2020. It has a capacity of 16 mmscmd and was developed at a cost of Rs 59 billion.
Key challenges and the way forward
The Petroleum and Natural Gas Regulatory Board has granted authorisation for laying an additional 16,600 km of natural gas pipeline in the country. However, physical progress on some of these pipelines is happening at a snail’s pace. This is because there is little incentive for pipeline companies to lay gas pipelines given the low returns. Moreover, the low utilisation of the recently laid pipelines has led to financial stress for pipeline companies, due to which they are not keen on venturing into new pipeline-laying projects. Other challenges that have hampered the development of pipeline infrastructure in the country include land acquisition issues for right of use, high pipeline tariffs for new customers, and duplication of pipeline assets along the national gas grid.
Going forward, there is a need to develop dedicated gas pipeline utility corridors across the country to promote the adoption of natural gas. There is also a need to introduce a rationalised tariff mechanism that can facilitate network expansion. Currently, there are distinct tariffs for each separately authorised/accepted pipeline, which leads to the adding up of tariffs for the use of multiple pipelines. The higher cost of gas as well as higher tariffs in the hinterland puts new regions at a competitive disadvantage. The introduction of a rationalised tariff mechanism will have various benefits. It will help avoid high cascaded tariffs for far-off customers, remove disparity among customers, provide a level playing field for all connected LNG terminals, improve the competitiveness of natural gas, reduce tariffs significantly for customers on pipelines like the JHBDPL, and facilitate infrastructure development.
There is also a need to redefine the statutory policy framework to ensure reasonable post-tax returns and make pipeline infrastructure development an attractive proposition. Further, financial support, in the form of capital grants and viability gap funding, must be provided for pipeline projects.