The government will need to make bold policy interventions if the country is to achieve its goal of more than doubling the share of natural gas in the energy mix to 15% by 2030, said GAIL chairman Sandeep Kumar Gupta. In an interview to ET’s Sanjeev Choudhary, the former finance chief of Indian Oil Corporation, who took over as the chief of India’s largest gas marketer and transporter in 2022, said the government should mandate the use of natural gas in refineries and steel making, and make emissions a factor in the merit order for electricity despatch to help gas-based power compete with coal-based supply. He also said natural gas should come under the goods and services tax (GST) regime, production-linked incentive (PLI) should be extended to LNG-powered vehicles and GST on CNG-powered vehicles should be slashed to 5% from 28%, on a par with electric vehicles (EVs). Edited excerpts:
How does the global gas market look?
The global gas market is well supplied and there is no concern about LNG prices. The OPEC+’s arbitrary production cuts, however, have an impact on LNG prices that are linked to crude oil. The situation can correct if the producer group reviewed its decision and took responsible action.
Global LNG export capacity is set to rise significantly over the next few years and that would put pressure on prices.
Is domestic gas demand rising?
There is no major uptick, especially in the power or the fertiliser sector. In city gas, though, there is some increase. Until refineries, steel and power shift to gas in a big way, the domestic demand wouldn’t expand significantly.
What can be done to boost gas demand?
Some policy interventions would be needed if we are to meet our goal of 15% gas in the domestic energy mix by 2030. Gas must be brought under GST, which will solve the problem of stranded input credit claims. The absence of input credit makes gas more expensive than competing liquid fuels. The gas should attract no more than 5% GST.
The 14% central excise duty on compression should go away as it is not a manufacturing activity. If we get tax relief, we can reduce CNG prices or offer incentives to drivers to convert to CNG.
About 80% of our gas-based power plants remain idle as they can’t make it to the merit order. When the country has set an ambition to raise the share of gas in the energy mix and there is a climate challenge, the merit order despatch should factor in not just the cost of production but also the emissions. The moment emissions are factored in, gas-based power will begin displacing otherwise cheaper coal-based power.
The government will need to mandate the use of natural gas in refineries, steel and other industries for environmental reasons. It should be mandatory for industries to use less-emitting natural gas for a certain percentage of their fuel requirements. Refiners have a large capacity to use natural gas, but their fuel decision today is guided by just economics.
Are you concerned that EVs can take away some of your markets?
The Centre is very supportive of EVs. States are also going full throttle. This will compromise the demand for CNG in those areas. The kind of incentives available to EVs should be extended to LNG and CNG vehicles. PLI for LNG vehicles should be given. GST on CNG vehicles is 28% today while that on EVs is just 5%. India’s electricity grid is largely grey today so gas should get support as a transition fuel.
What is your larger ambition for GAIL?
Our ambition is to make GAIL an integrated company in the gas value chain, a company of global standing.
We are seeking more authorisation for pipelines to complete the national gas grid. We are also planning to add big gas or ethane-based petrochemical facilities. There is a huge potential for petrochemicals in India as we import a great amount. But margins aren’t there. So, we would need tariff protection and fiscal incentives from the states to invest in new facilities.
