India Expands Natural Gas Pipeline Network but Sees City Gas Distribution Costs Increase
India will continue moving in the direction of increasing its natural gas infrastructure; its pipeline network is to expand vastly. The Ministry of Petroleum and Natural Gas on January 7 said that the pipeline network in the country will rise by 10,805 kilometres, from the existing operational network of 24,945 kilometres. This is regarded as a part of the process in finishing the national gas grid, which will be utilized in enhancing the uniform availability of natural gas to all regions in the country.
National Gas Grid Completion
The national gas grid will ensure a more secure and balanced supply of natural gas in India, leading to greater energy security and facilitating cleaner energy options. Over 10,800 kilometers added to the existing network have significantly improved access to natural gas in areas that are hitherto under-served. However, expansion has not been without a number of infrastructure-related challenges primarily related to cost and speed of pipeline installation.
Pipeline infrastructure development challenges.
One of the biggest challenges while constructing the pipeline network is the difference in costs of laying pipelines in different states. As per a report by Moneycontrol, the cost of laying pipelines ranges from Rs 60,000 per meter in some states to Rs 2,000 per meter in others. This difference is mainly because of the variation in local policies, regulatory environments, and logistics.
It addresses all such problems by sitting together with concerned state governments it streamlines the process. The standard charges of across states, say for a pipeline laying as well as a similar activity for cutting roads is a must-aim goal. Hence, for example, as a member on the PNGRB, Gajendra Singh observed that the vision is to hold these charges quite largely since gas pipeline infrastructure is basically a public utility rather than an entity from which they expect the State to make good returns.
The time taken for receiving permissions from the CGD companies to lay pipelines is a significant challenge. Approvals tend to be drawn out, while installation cost increases with regions that have lower consumer density, therefore, making expansion difficult for CGD companies and quite inefficient by their own methods.
Gas procurement costs are getting increasingly expensive for the CGD companies
The possible wrinkle while the development lies in expansion of gas pipeline network as the core, there seems to be less wrinkle for City Gas Distribution operations as the procurement costs go through the roof. CGD companies now need to grapple with enhanced procurement of natural gas costs tagged at Rs 2 to Rs 3 per kilogram, fact caused by less and less administered prices being available to it.
Under the APM, CGD operators have been given preference for gas supply at discounted rates, mainly from the legacy fields to support compressed natural gas and piped natural gas for domestic purposes. However, in an order recently pronounced, GAIL (India) Ltd., nodal agency of the domestic allocation of gas, capped the APM gas allocation by 20 percent to the CNG sector starting from October 16, 2024, which would catapult the procurement cost into significantly higher folds for CGD companies, impacting the consumer end pricing for both CNG as well as PNG.
These are, however significant risks to the growth and viability of the CGD companies because of escalating gas procurement costs and infrastructure-related challenges. Higher procurement costs would ensure that all such costs are passed to the consumers and increase prices of CNG and PNG making it even more problematic for the CGD operators to deliver them at reasonable costs to the consumers at a time when the customers are more willing to spend cost-effective and green sources of energy.
Also, the problem of laying of pipelines may impact the expansion in the speed services by CGD companies, but mainly to not covered areas.
It will affect the government more broad objective toward bringing natural gas throughout the nation to be utilised both transport and household ends.
Conclusion
Conclusion:Plans for expanding India’s natural gas pipeline network are crucial to building a complete national gas grid, but it does not come easy. Challenges associated with this expansion include the variable costs of pipeline installations, the delays in permissions, and increasing procurement costs for CGD companies. Although the government is trying to make the process smoother and more accessible for gas infrastructure, the CGD companies would have to evolve with the new scenario of gas procurement and pricing in order to sustain further growth and affordability for the consumers.
All stakeholders, that is, govt and PSUs, CGD operators, and consumers, will come together to remove the barriers to this process, which will make energy more sustainable and accessible for the country.
Source: Moneycontrol, Business Standard