Currently, domestic natural gas producers cannot participate in the exchange trading as they sell the fuel under tariffs fixed by the government every six months.

The country’s maiden gas trading platform was launched on Monday which is seen to provide more flexibility to users by providing them more options to book the fuel on short term contracts. For global suppliers, the exchange will provide a common platform where they will find the buyers in one place. Of the 64,000 million metric standard cubic metre (MMSCM) gas consumed in the country, about 52% of gas is imported through long term and spot contracts. In the first year of operations, the exchange aims to capture 2-3% of the spot trading volumes, which comprise about 30% of the total imports.

“The gas trading platform will play a vital role to discover our own price benchmark for gas, address demand supply gaps and accelerate investments in the value chain,” Union petroleum and natural gas minister Dharmendra Pradhan said while inaugurating the platform. Prices discovered in the exchange will be denominated in Indian rupee and not in US dollars, marking a shift from the conventional pricing system.

Currently, domestic natural gas producers cannot participate in the exchange trading as they sell the fuel under tariffs fixed by the government every six months. The Indian Gas Exchange (IGX) will offer spot and forward contracts for physical delivery of gas from the terminals in Dahej, Hazira in Gujarat and Ennore in Andhra Pradesh, while it plans to add more hubs soon. IGX is a unit of the Indian Energy Exchange which currently runs the largest electricity exchange in the country.

“IGX will drive industrial competitiveness, sustainability, spur investments in the gas value chain, deliver efficient utilisation of the pipeline infrastructure as well as ensure revival of gas-based power plants,” Rajiv Srivastava, managing director and CEO, IEX, said. Transmission capacity is not seen as a challenge for gas delivery through IGX contracts as most of the pipeline capacity is currently underutilised. The exchange is awaiting a favourable decision on transmission price rationalisation from the regulator, which is seen to encourage more participation in the platform.