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Quick Pointers:

* Focused on a free gas market with implementation of Online Bulletin board and ISO

* Future gas demand growth will come mainly from infrastructure expansion.

We hosted Mr. D K Sarraf, Chairman of the High-Level Expert Committee, Gas Vision 2040 (ex-Chairman of PNGRB and ex-CMD of ONGC) for a roadshow in Mumbai and gained further insights in India’s gas sector focusing on structural bottlenecks, regulatory gaps and areas of reforms needed to unlock India’s gas potential. Among the list of recommendations, Mr. Sarraf emphasized more on moving towards a free gas market by removing resale and destination restrictions in RLNG contracts, creating transparent 3rd party access to LNG terminals, ensuring coordinated development of pipelines along with connecting LNG terminals to the gas grid, establishing an ISO (Independent System Operator) to guarantee unbiased access to infrastructure, introducing a PNGRB-supervised online capacity-booking platform, real-time National Electronic Bulletin Board to display all pipelines/terminal related data, transitioning to an entry–exit tariff system, and improving liquidity & participation on gas exchanges to make gas trading easier and pricing more efficient. As per Mr. Sarraf, PNGRB has considered the report’s recommendations, and the impact of these reforms is expected to become visible over the next 1–1.5 years. Some of the other discussions during the roadshow are as follows:

Gas Demand growth - Future gas demand will grow mainly through wider pipeline coverage. Many districts are still unconnected, and the current territory-based CGD model leads to duplicate pipelines. Trunk pipelines should extend to every district, with CGD companies drawing gas from district city gates instead of distant trunk lines. Once district networks are built, small industries, CNG stations, and household connections will expand, lifting overall gas demand. These pipelines should be developed by players like IOC, GAIL, GSPL, Reliance, or new private players under a common-carrier, open-access system. Under a base case scenario, committee expects India's natural gas consumption to reach 260-300mmscmd by 2030 and 365-500mmscmd by 2040.

Implementation of gas under GST to be slow/difficult - Different states levy varying VAT/CST rates on natural gas, resulting in a cumulative tax burden of up to 30-35% for CNG, industrial, and commercial consumers (e.g., Gujarat VAT 15%, UP VAT 10-12.5%, excise duty 14%), which affects competitiveness. The committee recommended bringing natural gas under GST to ensure uniform taxation and promote free trade, but challenges like political resistance, fear of state revenue loss, and administrative complexity have stalled progress. A revenue-neutral GST rate was proposed, yet implementation remains unlikely in the near term

Integrated Energy Policy - India currently operates under multiple sector-specific energy policies for gas, electricity, renewables and coal, without a unified framework. This fragmented approach creates inefficiencies and investment uncertainty, highlighting the urgent need for a modern integrated energy policy to co-ordinate planning, pricing, and infrastructure across all energy sectors.

GAIL tariff revision – As per Mr. Sarraf, GAIL’s tariff was revised earlier than the usual 5-year cycle because two major changes occurred: the removal of its cheap APM gas allocation (forcing it to buy costlier market priced gas for pipeline compressors) and a recalculation of pipeline capacity by EIL, which altered cost assumptions. The recent tariff hike is neither a gain nor a loss for GAIL, because the PNGRB tariff model works like a continuous rolling account, any cost shortfall or excess is always recovered later with a regulated return of ~12% post-tax.

CGD’s - Big CGD players have relied on long-term exclusivity and cheap APM gas, but this advantage is shrinking. Mr. Sarraf expects that over the next 3-5 years, APM gas availability is expected to decline, raising concerns about long-term access to affordable gas. If petrol and diesel prices remain elevated and LNG prices soften due to enhanced supply, CGD businesses can remain economically viable even with reduced margins. Mr. Sarraf believes that several older CGD geographical areas such as Delhi, Mumbai, and Ahmedabad have completed their marketing and infrastructure exclusivity periods. This creates a strong case for PNGRB to introduce competition. Once pending cases are resolved, competition is expected to intensify, especially in Mumbai and other mature high-volume markets.?

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