A high-level expert committee set up by the Petroleum and Natural Gas Regulatory Board (PNGRB) has called for sweeping structural reforms to create a free, competitive natural gas market in India, arguing that market-driven pricing and open access are essential for the country’s clean energy transition.
In its report, Vision 2040 – Natural Gas Infrastructure in India, the panel led by former PNGRB chairperson D K Sarraf said a liberalised gas market would enhance transparency, spur investment, improve resource allocation and deepen liquidity.
A competitive system, it said, would remove current market distortions and attract new players across exploration, pipelines, LNG terminals and city gas distribution.
Natural gas, extracted from underground and offshore reservoirs, is used to generate power, produce fertiliser, turned into CNG to power vehicles, piped to household kitchens for cooking and serve as feedstock across several industries. Seen as a key transition fuel as India shifts from fossil fuels to renewables, its role in the energy mix is set to expand.
The government aims to raise the share of natural gas in the country’s energy basket to 15 per cent by 2030, up from the current 6.2 per cent.
India’s present pricing framework – an assortment of government-regulated gas, market-linked domestic production and LNG imports – creates inefficiencies, the committee noted. It flagged resale restrictions in regasified LNG (RLNG) contracts, lack of an Independent System Operator (ISO), limited open access to infrastructure, and the absence of contract-path transmission tariffs and location-based taxation as major hurdles.
Although India is among the world’s fastest-growing gas markets, it still lacks a liquid trading hub for price discovery. A robust market would bring the country closer to global hubs such as Henry Hub, NBP and TTF, enable flexible contracting and support better hedging mechanisms, the panel said.
The panel suggested the creation of a neutral, not-for-profit ISO to manage pipeline capacity, system balancing, scheduling and settlements. The proposed ISO would ensure transparent, non-discriminatory access to the transmission network and curb monopolistic practices.
It also proposed a unified online platform for real-time pipeline capacity booking under PNGRB oversight, along with a real-time bulletin board integrating SCADA data to publish capacity, flows, maintenance schedules and outages.
To boost liquidity, the committee urged a ban on resale restrictions and destination clauses in RLNG contracts, allowing buyers to freely resell gas in response to market conditions – bringing India in line with mature markets in Europe and the US.
For liquefied natural gas (LNG) import terminals, it recommended a transparent third-party access framework, including clear tariffs, rule-based operating procedures, ‘use-it-or-lose-it’ provisions and secondary capacity trading on authorised exchanges.
The panel backed a shift from route-based to entry-exit gas transportation tariffs. This structure – common in advanced markets – would allow shippers to book entry and exit capacities independently, simplify flows across the grid and pave the way for a virtual national gas hub and an eventual Indian gas benchmark.
To strengthen market liquidity, the report called for greater participation of large consumers such as fertiliser, power, CGD, refinery and petrochemical companies on gas exchanges. It also sought the removal of caps on high-pressure, high-temperature (HP-HT) gas trading, phased inclusion of administered price mechanism (APM) gas, and the launch of Gas Release Programmes mandating a portion of domestic or LNG supplies be sold through exchanges.
The panel further recommended aligning gas and power markets by synchronising gas and power days and introducing a day-ahead gas market with four six-hour trading blocks to facilitate flexible bidding.
Highlighting ongoing decarbonisation efforts, the committee proposed a Renewable Gas Certificate (RGC) mechanism for compressed biogas. A regulated, market-based trading system would allow obligated and voluntary entities to meet renewable gas blending targets through tradable certificates.
