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Is AP missing the Natural Gas Bus?

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Despite being one of the top producers it lags far behind in Natural Gas consumption

Natural Gas is being touted to play a significant role in the country’s future energy landscape by reducing carbon emission and achieving India’s net zero target.

Albeit renewables will need to play a paramount role in arresting climate change technological advancement and cost & affordability are some impediments for their rapid growth. It is here where Natural gas can be utilized as an efficient and sustainable alternative.

A fossil fuel primarily composed of methane (CH4), Natural gas is often said to be the cleanest Hydro-Carbon Fuel having minimal environmental impact. 

Apart from being environmentally friendly NG (Natural Gas) can be used in a variety of applications ranging from domestic gas, transport fuel as CNG and in Industries as fuel and feed stocks.

Further it can be easily transported through pipelines and trucks as CNG or LNG and are available for use.

What is encouraging is that India is said to have significant reserves of Natural gas and contrary to Oil, around 50% of internal Natural Gas consumption can be met through domestic production thereby negating import dependency.  

Govt. of India has already taken initiatives to promote natural gas as fuel and has set target to increase the Natural Gas Energy share from 5.78% (in 2022) to 15% by 2030.

AP-Leading NG producer

One state that has been playing a paramount role in the production of Natural gas has been Andhra Pradesh.

As per industry sources the state’s domestic production from onshore and off shore including KG Basin is more than 20% to national domestic production.

However despite being among the top producers of natural gas in the country NG consumption in AP is a mere 0.85 % (in FY23) of total national consumption, which is very low considering the state accounts for 4% population of the country. 

Contributing more than 20% to national domestic production AP consumes less than 1% of it.

In comparison other states  like Gujarat consumes 30% share of the NG and is able to fully utilise 100% of local production (around 2.7% of total production). 

Similarly other states like Maharashtra has a more than 16% share and Delhi more than 15% in NG consumption.

So with abundant production why is the state of Andhra Pradesh lagging far behind some of its peers in NG consumption. 

Soaring VAT:

To begin with NG in Andhra Pradesh, in purview of VAT, is taxed at a steep 24.5% for transport and industry sector which is highest among industry heavy economies like Tamil Nadu (5%), Maharashtra (3%), Gujarat (5%) and Karnataka (Industries- 5.5% & CNG- 14%). This makes it difficult to offer competitive prices in the market.

Likewise other states, such as Haryana have a VAT of 6.3%, Kerala 5%, UP 10%, Telangana 14.5% & Orissa 15% have offered relaxation in VAT for NG, which helped in creating conducive environment in proliferation of NG in the energy mix.

Infrastructure limitations: 

Second is lack of robust infrastructure. The availability and expansion of Natural Gas infrastructure, including pipelines and distribution networks, is limiting the accessibility of Natural Gas to consumers. 

APGDC Natural Gas pipe line planned from Kakinada to Srikakulam, for supplying Gas in the state, is delayed and is yet to be completed. 

Further, pipeline connectivity for East west corridor, as a part of National Grid, is pending for commissioning. Timely commissioning of these networks shall be crucial for the availability of the Gas in the state.

With AP fast emerging as a preferred industrial destination comprising of 3 Industrial Hubs & 3 Industrial Corridors, 4 Major Ports, 32 Special Economic Zones, 258 Industrial Parks including JICA supported Chennai – Bangalore Industrial Corridor (CBIC) and ADB supported Visakhapatnam – Chennai Industrial Corridor (VCIC) utilization of NG could be a game changer with its wide range of application for use in industrial sector. 

Industry insiders say that any policy decision to promote NG in industrial sector will have cascading effect and kick start the chain of change.

Appropriate subsidies or incentives, can encourage more industries and consumers to switch to Natural gas.

If planned correctly Andhra Pradesh (AP), certainly can, not only lead, but be the front runner in race of Green movement and top contributor in the country’s endeavour to achieve Net Zero by 2070.

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