India’s natural gas consumption has rebounded significantly from the post-COVID-19 slump, with small-to-medium scale industries leading the charge. According to a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA), sectors such as tea plantations, manufacturing, liquefied petroleum gas (LPG) shrinkage, and sponge iron have driven this resurgence. Although the power sector has seen an increase in gas use for peak demand over the past two fiscal years, it has not yet returned to pre-pandemic levels.
The report indicates a dramatic rise in natural gas consumption within the industrial sector, which saw a 37% increase from FY 2019-20 to FY 2023-24. Notably, consumption by sectors outside refineries and petrochemicals surged by 136% during this period. Gas consumption by these other industries jumped from around 7,000 million metric standard cubic meters (MMSCM) in FY 2019-20 to over 16,000 MMSCM in FY 2023-24, accounting for almost two-thirds of the industrial sector’s total gas use.
The IEEFA report attributes this increase to the improved availability and affordability of domestic natural gas, making it a viable fuel option for smaller industries. However, the report also raises concerns about the sustainability of this growth, given the limited availability of domestic natural gas and the potential for future price volatility. The proposed deregulation of gas pricing in 2027, coupled with rising global gas prices, could threaten the competitiveness of natural gas as an industrial fuel.
The report suggests exploring cleaner and more efficient alternatives to mitigate dependence on natural gas, such as enhancing energy efficiency, using renewable energy, and incorporating green hydrogen and biogas in industrial processes. These measures could help industries reduce their carbon footprint while maintaining economic viability.