KOLKATA (miningweekly.com) – India’s protracted efforts to set up a domestic natural gas hub are expected to come to fruition in March 2020, when a national gas trading exchange is expected to become operational.

The Indian Energy Exchange – the nationwide automated platform for physical delivery of electricity – will set up the national gas trading hub and is expected to create a dedicated team to operate the hub.

The operationalisation of the gas trading hub, in the works for the last two years, is expected to bring down the domestic price of natural gas through greater transparent competition and as a result of the price discovery mechanism.

It also forms part of the country’s goal of increasing the share of natural gas in the energy basket to 15% by 2030, up from 6% at present, sources familiar with the process of setting up the exchange said.

The sources said that by March next year, the Union Cabinet was expected to approve and complete the process of splitting up the marketing and distribution business verticals of State-run GAIL India. This has been a necessary precondition to setting up the exchange to prevent the risk of conflicts of interest for GAIL owing to its potentially having monopolistic control as the gas distribution pipeline network operator and operating as a gas trader at the same time.

Though trading rules and regulations were yet to be finalised, the sources said that the government was considering setting aside a predetermined volume of natural gas in the domestic market to be traded through the platform. The single biggest challenge facing a national trading platform is multiple taxes that will be involved in moving natural gas across various states, as natural gas has been kept out of the pan-India Goods and Service Tax and is liable for various different state level sales taxes as the commodity is transported from one state to another, the sources added.

Significantly, India’s natural gas production during April to October 2019, declined by 2.1% over the corresponding prior-year period. Domestic natural gas production during October 2019, was down 5.6% at 2.64-billion cubic meters (bcm) compared to the corresponding month of the previous year.

State-run exploration and production (E&P) major ONGC has recorded a 7.4% fall in gas production to 1.95 bcm, while second largest national E&P company Oil India was able to increase production by 1.6% to 0.24 bcm. Production of private E&P companies and joint ventures also declined 1% to 0.45 bcm during October 2019.