Kamal Ghorui
Gas is the unseen backbone of modern India—fueling kitchens, fertiliser production, industry, and increasingly transport. Since India is an energy-dependent country, each geopolitical shock—sanctions, conflict, or blockades—triggers cascading disruptions: cooking gas shortages, price spikes, slower fertiliser output, rising transport costs, and weakened industrial activity. Besides Heavy reliance on imports, inadequate infrastructure, and persistent policy and investment bottlenecks reveal a systemic vulnerability, not a temporary one.
India’s reliance on imported hydrocarbons has reached critical levels. Crude oil import dependence stands at 88.6%, with nearly 5.2 million barrels per day imported—over half of which flows through the Strait of Hormuz. LPG, the primary cooking fuel for close to 300 million households, meets about 69% of demand through imports, largely from West Asia. India also imports LNG, roughly 26 million metric tonnes annually, which is about 50% of its total requirement.
Gas is not merely a cooking fuel; it is the lifeblood of India’s fertiliser industry, accounting for nearly 30% of annual natural gas demand and underpinning food security. Disruptions hit the urea sector hardest, where gas is a critical feedstock. When prices surge, or supplies tighten, plants scale down or shut down, forcing costly fertiliser imports—often from West Asia—deepening external dependence. Energy insecurity thus translates directly into food insecurity, a risk India cannot afford. Gas is equally vital to transport, powering over 7.7 million CNG vehicles. Thus, the price shocks cascade across sectors.
The economics of this dependence are punishing. Imported LNG carries heavy add-on costs—liquefaction, specialised shipping, regasification and distribution—often doubling or tripling the benchmark price by the time it reaches consumers. To avoid such challenges and reduce costs, India embarked on pipeline diplomacy but could not succeed. The Turkmenistan–Afghanistan–Pakistan–India (TAPI) pipeline, envisioned as a source of stable, low-cost Central Asian gas, embodies both the promise and the failure of India’s diversification strategy due to several geopolitical challenges. However, shifting dynamics in Afghanistan and the growing vulnerability of energy security across the region demand a strategic reset. India must reframe its energy diplomacy around shared economic interests rather than zero-sum geopolitics.
Domestic Production: Policy Without Payoff
Domestic gas production in India rests on two pillars: conventional exploration in the KG Basin and Bombay High, and the development of alternative sources. Both, however, remain stories of unfulfilled promise. Despite successive policy reforms aimed at liberalisation, output has largely stagnated. Public sector undertakings such as ONGC and Oil India Limited continue to dominate, but are constrained by ageing fields, slow adoption of enhanced recovery techniques, project delays and operational inefficiencies.
Equally troubling is the investment climate. Private and foreign players remain cautious amid high geological risks, regulatory uncertainty, pricing ambiguities and the absence of a stable, long-term policy framework—further complicated by evolving energy transition commitments.
The status of alternative gas sources is much more alarming. Coal Bed Methane (CBM), compressed biogas (CBG), coal gasification, and green hydrogen were envisaged as pillars of India’s gas strategy, yet together contribute to less than 2%. The constraint is not resource scarcity but fragmented, unsuitable engineering and technologies, and inadequate R&D that have kept them commercially unviable. This is evident in coal gasification: despite producing 1 billion tonnes of coal annually, India adopted imported technologies that were ill-suited to its high-ash coal. Similarly, biofuel efforts should prioritise bio-waste feedstocks over agricultural sources critical to food security, including livestock. A mission-driven, indigenous R&D push—backed by scale and policy certainty—is essential to unlock these resources and raise their share in the gas mix. Coal gasification was a missed opportunity, and reviving it is not merely desirable—it is an essential strategic imperative for India.
The Macroeconomic Shock: Stagflation Risks
India today faces a convergence of global headwinds—energy price volatility, trade fragmentation and financial market uncertainty. Disruptions in the Strait of Hormuz amplify these risks, as rising import bills weaken the rupee, stoke inflation and constrain fiscal space, raising the spectre of stagflation i.e high inflation, high unemployment and lower growth.
Amid these pressures, the gas sector offers a critical lever for stabilisation. City Gas Distribution (CGD) is a telling case study that captures both the promise and the limitations of India’s gas ecosystem. It reflects a “missing middle”—a classic chicken-and-egg trap: constrained upstream supply, strong downstream demand, but inadequate midstream pipeline infrastructure. Despite the Petroleum and Natural Gas Regulatory Board authorising over 300 geographical areas and PNG connections crossing 1.4 crore, expansion remains modest for a country of India’s scale.
Despite the shortcomings, the potential gains, however, are significant. Investment of ₹1.2–1.5 lakh crore in CGD alone could generate over a lakh jobs while delivering clean, efficient energy to millions. Thus, large-scale investments across the gas value chain—from exploration and production to LNG terminals and pipelines—can create massive employment in the organised sector.
India needs a Mission Mode Approach.
Besides the CBD project, the government’s ambitious target of $100 billion investment in oil and gas by 2030 can be a key remedy to address the issue. But capital alone and a piecemeal approach are not enough: a decisive, mission-mode push anchored in strong institutional coordination is the need of the hour. What is essential is policy clarity, regulatory stability, and greater institutional coordination.
Given the crisis’s pervasive impact, it is appropriate for the Prime Minister to convene a high-level meeting of bankers, public sector undertakings, private investors, and regulators. The agenda must be concrete and time-bound: setting realistic capex norms, fast-tracking infrastructure clearances, developing innovative financing models for domestic exploration, and developing alternative technologies for gas production. A clear roadmap to phase out the outdated cylinder-based system in favour of efficient piped natural gas (PNG) delivery.
There is no dearth of investments in India. Banks and financial institutions in India are eager to invest in bankable projects. The gas sector, with high demand elasticity, is an attractive sector for such investments. The high-level intervention can convert the travails of gas into a compelling story of energy security, industrial resurgence, and inclusive growth and employment generation to tackle this impending stagflation.
The travails of gas are not inevitable. But ignoring them would be.
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