India's use of natural gas has reduced due to least availability of domestic gas.
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The Petroleum and Natural Gas Regulatory Board (PNGRB) Vision 2030 report on natural gas infrastructure, released in 2013, states that the “actual demand” for natural gas will increase from 6.8 per cent to 516.97 mmscmd (metric) CAGR (compound average growth rate). Million cubic meters per day in 2020-21). The share of gas-based manufacturing was about 46 per cent for demand, while the share of the fertilizer sector was expected to decline from 25 per cent in 2013 to about 20 per cent in 2021. During the same period, the share of CGD (city gas distribution) sector was expected to increase from 6 per cent to about 9 per cent, while the share of industry will be around 7 per cent in 2020-21. By 2020-21, the contribution of petrochemicals was 15 per cent, while that of iron and steel was about 2 per cent. According to the report, "realistic demand" considered the limited factors that hinder growth.
When the government shifted to a new price formula for domestic natural gas in 2015, the price of domestic gas supplied to the fertilizer industry rose to about US $ 4.66 / mmBtu (based on total calorific value), but fell to about US $ 2.99 / mmBtu. March 2022.
Natural gas consumption declined from 2011-12 levels mainly due to lower domestic gas availability. Consumption increased in 2015-16 as liquefied natural gas (LNG) was relatively cheap and imports increased. Natural gas consumption matched the consumption level of 176.58 mmscmd in 2011-12, only 175.74 mmscmd in 2019-20. Although consumption began to rise after the end of the epidemic-related lockdown, it was not even close to the estimated level. Another deviation from the estimates is the areas that contribute to growth. The fertilizer sector is today the largest consumer of natural gas, consuming about 30 percent. The energy sector, which is expected to be the largest consumer of gas in 2021-22, has slipped to third place, with only 15 per cent consumption in 2021-22, while CGD, which was expected to have only 9 per cent consumption, is in second place. Consumption is about 20 percent in 2021-22.
Fertilizer area
Fertilizer sector is preferred in gas allocation policy, rationing system with domestic natural gas shortage. Although priorities continue, declining natural gas production is reducing the amount of domestic gas that can be allocated to the fertilizer industry (and other priority industries). In 2012-13, more than 76 per cent of the total gas used by the fertilizer industry was produced domestically. In contrast, in 2021-22, LNG imported 68 per cent of the natural gas used for fertilizer production.
Fertilizers are sold to farmers at a discount of 70% of the cost of production and the fertilizer industry gets the difference as a subsidy. Until 2015, domestic fertilizer was supplied to the fertilizer industry under the Administrative Pricing System (APM) at US $ 4.2 / mmBtu (based on net calorific value). When the government shifted to a new pricing formula for domestic natural gas in 2015, the price of domestic gas supplied to the fertilizer industry rose to about US $ 4.66 / mmBtu (based on total calorific value), but fell to about US $ 2.99 / mmBtu in March 2022.
The formula-based price of domestic gas has since been increased to US $ 6.10 / mmBtu and the price of imported LNG is around US $ 20-35 / mmBtu. As fertilizer production is important for the agricultural sector, the increase in gas prices is absorbed by government subsidies. Combining gas prices (domestic and imported) for the fertilizer industry, all fertilizer plants can get a uniform price regardless of the share of LNG they use.
Many fertilizer plants that have historically used naphtha as feedstock have changed or are turning to the use of natural gas which will increase gas consumption.
In addition, about Rs 500 billion has been invested in the revival of closed fertilizer plants and in the 2,650 km Jagdishpur-Haldia and Bokaro-Dhamra natural gas pipelines, known as the 'Prime Energy Ganga' as the 'Second Green Revolution'. The government said the use of natural gas is increasing. Many fertilizer plants that have historically used naphtha as feedstock have changed or are turning to the use of natural gas which will increase gas consumption. Analysts point to an increase in fertilizer subsidies as the price of imported LNG rises and recommend moving to green alternatives, but the complex strategic nature of food production is least possible to change in near future.
City gas distribution area
In 2007, PNGRB (Petroleum and Natural Gas Regulatory Board) planned to supply CNG (compressed natural gas) to supply CNG (compressed natural gas) and increase piped natural gas (PNG) connections to homes and industries from 30 to 3000 cities. As of October 2015, India had a total of 1026 CNG stations and 3 million PNG connections. In March 2022, there were 4013 CNG stations (GAGR 21.51 per cent) and 9 million PNG connections (CAGR 17.16 per cent). The national gas grid will be expanded from the current 20,000 km to 35,000 km.
With the completion of the 11th CGD auction, 96 per cent of India's population and 86 per cent of its geographical area is expected to be covered under the CGD network. The claim that 86 percent of the population is covered under CGD only indicates potential access and not actual use. There are around 300 million LPG subscription on contrast to the mere 09 million (almost3 percent) PNG connections, however PNG is growing in metro cities.
In 2021-22, 48 per cent of CGD consumption came from LNG imports. Unlike the fertilizer industry, the CGD industry can, in principle, offer consumers an increase in gas prices. However PNG’s domestic customers are price sensitive which limits the CGD operator’s ability to allow customers to fully increase LNG import costs. Industrial consumers are also price sensitive and can turn to cheaper alternatives if the pollution order is not enforced.
Events
Strategic objectives not related to energy and environmental concerns are driving up the use of fertilizers. Since the Green Revolution, domestic production of fertilizers has benefited from policies that support the dual objectives of food security and protection of farmers' incomes. This means prioritizing the availability of natural gas, the main input for fertilizer production, for the fertilizer industry, and subsidizing the price of natural gas to limit fertilizer prices.
The use of natural gas in the fertilizer sector is expected to result in an overall increase in input prices due to government subsidies regardless of cost. While the fertilizer industry complains that government guarantees are inadequate and do not meet on time, this is a reliable assurance on which the industry relies entirely. Labeled as a moral hazard in economic theory, this is not a guarantee that can be extended to all gas consuming regions.
The use of natural gas in the fertilizer sector is expected to result in an overall increase in input prices due to government subsidies regardless of cost.
In the case of CGD, the drivers of use are related to energy and the environment. Consumption was initially boosted by concerns about urban pollution caused by liquid transport fuels, and the court ordered the use of alternatives such as natural gas, which are expected to reduce pollution levels. Later the possibility of replacing subsidized bottled LPG for cooking in homes led to the expansion of PNG connections. This not only minimises the overhead unnecessary subsidy on LPG but also makes the LPG cylinders available for distribution in remote rural areas which to some extend is politically valuable. Another factor that facilitates the growth of gas as a transport fuel is its price competitiveness over oil options. Compared to heavily taxed petroleum products like petrol and diesel, lighter taxed gas has made gas a cheaper alternative as a fuel for transportation.
These factors have contributed to the increase in gas consumption by the CGD sector, but they may not last long. The value of gas as a competitive fuel may decline as the share of expensive LNG imported into the CGD continues to rise. Inadequate returns from domestic connections can also prevent the expansion of CGD. Transaction costs in CGD such as the cost of customer editing are high. In densely populated cities it is as high as R 15,000 per customer, and in less densely populated cities it can be as high. Access to the ground and going to the right also prevents the expansion of the PNG pipeline network. The policy of offering open access to the pipeline to competing CNG suppliers may reduce investment in the CGD network. However, the short-term growth momentum in the CGD sector is likely to continue, especially if its competitiveness on petroleum is maintained
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