The increasing tension in the Middle East and the threat on the Strait of Hormuz shook the energy supply of the entire world. About 20 percent of the world’s oil and gas passes through this route, so even the slightest threat on this route directly affects the global market. India, which imports a major part of its LPG requirement, did not remain untouched by this crisis, but this time India not only tried to handle the situation but decided to change the entire system. LPG shipments started getting delayed, transport and freight costs increased and supply pressure started being felt in the domestic market.
Government’s big step: change in LPG model
With this thinking in mind, the government implemented a new order under the Essential Commodities Act, the objective of which is clear, to eliminate dependence on cylinders where piped gas can reach. The most important part of this policy is the “PNG First” approach. Now in urban areas where piped natural gas is available, LPG cylinders will be gradually removed. With this, gas supply will be more stable and expenses on logistics will also reduce and dependence on imports will also reduce.
The biggest hurdle in infrastructure was removed
Till now, the biggest problem in laying the pipeline was getting permission from different agencies, which used to take not just months but sometimes years. An attempt has been made to eliminate this obstacle directly in the new order. The government has given Mandatory Right of Way to companies like GAIL, IGL, MGL and Adani Total Gas. This means that now railways, highway authorities or local bodies will not be able to stop the pipeline project. With this, the gas network will be expanded much faster than before.
Major change in clearance system
Another major reason for delay in infrastructure projects was the approval process. This has also been completely changed. Now it will be mandatory to approve pipeline related projects in urban areas within 10 days, whereas a deadline of 60 days has been fixed for national level projects. If no reply is received within this period, it will be considered as automatic approval i.e. Deemed Clearance. This is the same model that gave impetus to the expansion of highways and digital infrastructure in the country.
Impact on companies and market
The impact of this decision will not be limited to consumers only but will be visible on the entire gas industry. For GAIL, this is an opportunity to expand the network and increase transmission revenue, while for companies like IGL and MGL, there is a possibility of sharp increase in domestic and CNG demand. Companies like Gujarat Gas in the industrial sector will benefit because ‘last mile connectivity’ will increase rapidly. On the other hand, demand for LNG imports may increase for players like Petronet LNG. Oil companies like IOC, BPCL and HPCL can also now accelerate the direction of converting their petrol pumps into multi-energy hubs.
India’s big strategy – step towards energy security
This change is not limited to LPG only but is part of India’s entire energy strategy. The government is now working on diversifying the supply source, where earlier there was import from about 27 countries, there is a plan to increase it to more than 40 countries. Along with this, India wants to increase the share of gas in its energy mix from the current 6 percent to 15 percent. In the transport sector also, LCNG, CNG and electric vehicle infrastructure is being expanded rapidly so that dependence on oil can be reduced.
New system emerged from the crisis
The biggest message of this entire incident is that India is now moving ahead with the policy of reacting only when a crisis arises. The Iran war certainly created a risk, but the same risk gave India an opportunity to improve its weakest link, LPG supply and logistics.