Future-proofing gas sector: Key reforms for enhanced market efficiency – Opinion News

By Rajeev Mathur

A well-developed gas transmission infrastructure is a fundamental pillar of a competitive gas market. As a natural monopoly, the transmission network requires strong, neutral, and non-discriminatory access frameworks to ensure fair market participation. Efficient, transparent, and prompt access to transport capacity — without compromising the security of the gas grid — is essential for fostering competition and unlocking the full potential of India’s gas sector.

India’s gas market holds immense potential to support its energy transition, particularly as efforts intensify to integrate cleaner, more sustainable energy sources. However, inefficiencies in transportation capacity allocation and access mechanisms have constrained market growth. Key challenges such as outdated regulatory frameworks, the consolidation of marketing and transportation functions, and a lack of transparency, necessitate urgent reform. Addressing these is critical to ensuring an open, competitive, and efficient market that can dynamically respond to the evolving energy landscape.

Challenges in gas transport

One of the primary challenges affecting the industry is an outdated code that governs the access to pipelines/grid and related procedures. The current code is in existence for more than 10 years and does not align with international best practices or cater to the evolving market demands. For example, pipeline operators are allowed up to three days to confirm capacity booking, which is too long a time for short-term transactions. Additionally, the absence of mechanisms such as day-ahead or within-day capacity booking restricts flexibility and stifles the development of a market-oriented balancing system. Moreover, it remains difficult to book capacity on non-working days.

Another major issue is the lack of transparency in accessing pipeline capacity. Unlike developed markets where electronic gas bulletin boards (GBBs) provide real-time information on capacity, India lacks such a platform. Users must individually contact each owner for pipelines along their contract path, dealing with different rules and procedures. There is no unified, online, and prompt capacity booking portal.

The integration of marketing and transportation functions adds another layer of complexity. Organisations that integrate these functions reap benefits like the elimination of imbalance charges and reduced booking response times for their bundled agreements while imposing more rigorous conditions on other entities. This creates an uneven playing field, discouraging fair competition and limiting opportunities for third-party suppliers, ultimately hindering market growth.

Furthermore, gas-fired power plants which are vital for balancing fluctuations in renewable energy (RE) generation remain underutilised. These plants face challenges in securing timely access to pipeline capacity, stemming from the inefficiencies in the capacity booking regime.

To grapple with these problems, India needs a series of well-targeted reforms.

Access code revision: The access code needs to be revised according to current market needs and global benchmarks. Reducing the response time for capacity reservations and implementing provisions for day-ahead and within-day agreements will build flexibility and even increase the market.

Creation of an independent system operator (ISO): An independent ISO is imperative to ensure fair, transparent, and efficient access to transportation capacity. It would resolve the conflicts of interest arising from the integrated entities.

Electronic GBBs: Implementing GBBs will enable real-time access to information on pipeline capacity. It will also create an open, rule-based structure that will enable all market participants both to access and book capacity, thus fostering reliance and improving market efficiency.

Unbundling of marketing and transport functions: A segregation of marketing and transportation by decoupling these functions will help create a more balanced environment for independent suppliers. Eliminating the “right of first use” and encouraging fair competition between bundled entities and third-party participants will promote greater participation and innovation in the sector.

Benefits of reforms

These reforms will lead to a more efficient and transparent gas market. Faster and more reliable capacity booking processes will reduce operational delays while real-time capacity information will empower stakeholders to make informed decisions. Unbundling marketing and transport functions will stimulate competition, attract new investments, and support a robust market ecosystem.

The power sector will also gain significantly from these changes. Improved access to gas supplies and pipeline capacity will allow gas-based power plants to play a critical role in balancing RE sources, ensuring grid stability, and meeting peak power demand effectively.

India’s gas sector stands at a crossroads and proposals reforms could be an antidote to inefficiencies and a strategic move to future-proof the industry. Upgrading regulations, transparency, and equal access would essentially lead to the development of a vibrant and competitive gas market supporting the broader energy goals of the nation. These reforms would facilitate better access to transport capacity and make the gas sector an enabler of India’s clean energy transition.

The writer is director, HCG Group.

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