New Delhi: The Indian gas sector is facing a crisis of confidence in its industry and the government’s inability to provide reliable and timely supplies, which is hampering its growth.
As of June 30, 2016, the gas sector, which accounted for 8.8% of India’s total consumption, had a cumulative output of around 2.2 billion cubic meters, according to a study commissioned by the Ministry of Petroleum and Natural Gas.
The study also found that, out of the 2.4 billion cubic meter output, more than 90% of it was generated by non-conventional gas sources.
The report stated that “the sector has been hit by a sharp decline in the volume of gas being consumed by consumers and the lack of adequate supply, particularly for long-term contracts.
The decline in consumption is due to a sharp increase in natural gas consumption and an increase in demand for domestic consumption”.
“The Indian government’s failure to provide timely gas supplies has also adversely impacted the industry’s profitability, and it is difficult for the industry to survive in the coming years”, said Pratap Jain, executive director of the Centre for Gas Development and Research (CGDR), a research institute.
A recent report from CGDR showed that “gas consumption fell by 15.7% in the first quarter of 2016, while domestic demand for natural gas increased by 14.3%”.
According to the report, “there are still more than 1.6 million small and medium enterprises (SMEs) in the gas-rich states of Odisha, Andhra Pradesh, Andaman and Nicobar Islands and the Andaman Sea”.
The sector has witnessed a sharp drop in the value of the domestic natural gas market, due to the lack or reduction in gas availability due to poor supply.
In addition, gas prices have been rising, which has adversely affected the sector.
As a result, “the market is losing momentum, with demand dropping by 40% in a year, according the survey”.
In addition to the loss of demand, the price of gas has also been falling due to an increasing number of domestic gas-powered vehicles, which have been required to be replaced due to high consumption, said Anil Chaturvedi, managing director of CGDR.
“The gas industry needs to make up for this loss of capacity,” he said.
“Gas consumption is the largest source of capital expenditure in the country, so we need to address this problem with more investment and more subsidies”.
A number of states in the Indian gas belt, including Odisha and Andaman, are also struggling to fill up the gap in supply.
The government has been making efforts to revive gas production and provide timely supplies of gas to the gas industry.
The National Green Tribunal (NGT) is hearing a petition filed by the State Electricity Corporation of India (SECI) on September 23, 2016 in which it is challenging the decision to reduce gas supply to the states in December 2016.
In the petition, the NGT says that the government had made a decision to cut gas supplies to Odisha in September 2016.
However, in December, 2016 the National Energy Efficiency Council (NEEC) had issued a notification to the State Power Corporation of Andaman & Nicobar (SPNCA) to provide gas for a period of two years.
The NEEC had also given an additional two years for the State Government to meet its obligations under the Natural Energy Policy.
The petition also notes that there is a shortage of fuel in the market and the supply of gas is being affected by increasing demand from the cities.
The Supreme Court, however, has not yet taken up the NTT petition.
“If the government does not give the gas to Odiffs in December and if the gas supply is restricted to two years, there will be no gas in the pipeline,” said Jain.
“This has a knock-on effect on the energy sector.
The gas supply for the states has been restricted for two years and gas demand has been affected by the lack and increased consumption.
The current gas shortage is causing the sector to experience a decline in production, and there is no hope of it recovering any time soon”.
The government of Odiffi has not responded to queries.