By Rajesh Kumar Mediratta, Director, IGX and Director (Strategy/RA), IEX
The Government of India has set a target of raising the share of natural gas in the primary energybasket to 15 percent by 2030, from the current 6.2 percent. In the recent Budget speech, Finance Minister Nirmala Sitharaman laid down plans for the expansion of the national natural gas pipeline network to 27,000 km from the present 16,200 km. She also announced pricing reforms as the Government looks at boosting the use of environment-friendly fuel. The Finance minister also said, “To deepen gas markets in India, further reforms will be undertaken to facilitate transparent price discovery and ease of transactions.” The Oil Minister Dharmendra Pradhan has also commented on these developments, noting that the Budget lays emphasis on creating next-generation financial markets, boosting income and investment, and several infrastructural reforms for accelerated economic growth.
To achieve all these objectives and help India become a gas-based economy, we need to build a market platform that will provide flexibility, transparency, and a competitive price discovery mechanism. This platform needs to be designed such that it is attractive and beneficial for both buyers and sellers. In the current unstructured gas market, trade is mostly based on physical contracts and personal negotiations. Our new tech-led offering, the Indian Gas Exchange, will allow participants to place orders and perform transactions digitally. The delivery and settlement of all orders will be taken care of by the platform. This digitization of the process will allow more people to participate, both as buyers and sellers.
Several industrial buyers generally do not get access to the market because of their size. They are not in a position to command a competitive price because of a lack of sellers who are willing to trade. With IGX acting as an aggregator on the demand side, these buyers will now be able to access a market that is transparent, flexible and competitive.
Also, since we will set the price benchmark for the whole market, sellers uncover more opportunities to share, hence bringing more gas into the system. Around the world, industries are opting for cleaner and sustainable alternatives as compared to coal and other fossil fuels. It is not surprising that estimates suggest that natural gas and electricity are likely to provide close to two-thirds of total industrial energy by 2040. In India too, industries looking to transition towards gas for their energy needs are restricted by the system of bundled rigid contracts for a minimum period of month and going up to 1 year. A platform like IGX provides these industries the flexibility of buying gas for the next day or for a week along with options to purchase on fortnight and monthly basis.
IGX will be able to provide participants with transparency in terms of trade, flexibility in terms of contracts, and competitive prices using is a cutting edge technology-based price discovery platform. Eventually, this supports GoI’s vision to increase the share of gas in India’s energy mix.