Uniform transmission tariff will boost liquidity, ensure robust price discovery: Rajesh Mediratta, IGX
Since gas transmission through pipelines is based on distance, the buyer located in some other state will have to include the transportation cost while buying the LNG from any of these three hubs
New Delhi: A uniform transmission tariff in the gas market will ensure more liquidity and active participation of industry players resulting into effective and robust price discovery, according to Rajesh Kumar Mediratta, Director at Indian Gas Exchange (IGX), the country’s first gas trading platform launched Tuesday.
“Tomorrow if there is a uniform gas transmission tariff policy across the country, then there will be one virtual hub for quoting the price which will facilitate more active participation, more liquidy and more competition leading to an effective and robust price discovery,” Mediratta said.
At the launching ceremony of the IGX platform, oil minister Dharmendra Pradhan said that the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) will soon announce a new “pro-business” tariff policy for gas transport. Speaking on the move, Mediratta said that this is a very suitable move as reforms in transportation of gas will give a boost to trading through exchange.
“We will be facilitating trade and taking care of delivery and financial settlement through this delivery based platform,” he said. Presently there are three hubs for physical delivery of liquified natural gas (LNG) – Dahej and Hazira in Gujarat and Kakinada in Andhra Pradesh.
Since gas transmission through pipelines is based on distance, the buyer located in some other state will have to include the transportation cost while buying the LNG from any of these three hubs. “The buyer in some other state can quote a price which is taking care of the transportation and transmission charge as well,” Mediratta said, adding that gas exchange will be working on the basis of daily, day-ahead, weekly, fortnightly and monthly market.
Speaking on the potential of gas market in the country, he said that currently 30 per cent of natural gas is traded in the short term spot market. IGX focus will be on LNG spot agencies which sell gas under short term contract of upto one year. “We are eyeing around 4 to 5 per cent of this 30 per cent market share as our first year target,” he said.
India has set the target to increase the proportion of natural gas in the country’s energy mix from current 6.2 per cent to 15 per cent by 2030 and for this the government will come up with a new pipeline tariff policy which will replace existing practice of seven different pipeline operators charging separate rates.
“With improving gas infrastructure and more terminals getting connected across the country like the Urja Ganga pipeline providing connectivity to the North-Eastern region, will really boost the gas demand,” Mediratta said. He also added when the gas demand goes up, the supply automatically comes and the real expansion of market takes place.
At present there are 12 members and 350 clients registered at IGX which includes buyers, sellers and users. “There are many industries that use gas as fuel and they can actually move to the gas exchange as gas is going to become cheaper, once you have a robust pipeline connectivity,” he said.
India has around 24,000 megawatt of stressed gas based power plants, according to the Standing Committee Report on Energy submitted in parliament in January 2019. Speaking on this stranded gas based capacity, Mediratta said that these power plants can actually utilise their stranded gas capacity through exchange.
“Today what is happening is when a gas plant wants to buy gas, they have the option to buy under a one year contract, which means that if the gas is not consumed, they will still have to pay for the gas,” he said. He added that with the introduction of gas exchange, these buyers can check the price of gas in the market and if it is low they can purchase it, which will ultimately benefit them by making their cost of power production only be Rs. 2 to 2.5 per unit.
Speaking on the future of trading through gas exchange platform, Mediratta said that he is quite optimistic as today there is around 10 to 12 per cent of electricity market available for short term trading but here there is much higher 30 per cent of LNG available for trade in the spot market.