Indian Gas Exchange launched in e-ceremony

• Indian Gas Exchange (IGX) is the first nationwide online delivery-based gas trading platform.
• IGX will be a delivery-based trading platform for the delivery of Natural Gas.
• Incorporated as a wholly-owned subsidiary of the IEX – India’s energy market platform.
• The platform is fully automated with a web-based interface to provide a seamless trading experience to the customers.

How will this exchange work?

• The IGX is a digital trading platform that will allow buyers and sellers of natural gas to trade both in the spot market and in the forward market for imported natural gas across three hubs —Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.
• Imported Liquified Natural Gas (LNG) will be re-gasified and sold to buyers through the exchange, removing the requirement for buyers and sellers to find each other.
• The exchange also allows much shorter contracts – for delivery on the next day, and up to a month – while ordinarily contracts for natural gas supply are as long as six months to a year.
• Will domestically produced natural gas also be bought and sold on the exchange?
• No. The price of domestically produced natural gas is decided by the government. It will not be sold on the gas exchange.

Why this was necessary?

• Domestic production of gas has been falling over the past two fiscals as current sources of natural gas have become less productive.
• Domestically produced natural gas currently accounts for less than half the country’s natural gas consumption; imported LNG accounts for the other half.
• LNG imports are set to become a larger proportion of domestic gas consumption as India moves to increase the proportion of natural gas in the energy basket from 6.2% in 2018 to 15% by 2030.

Benefits:

• This will help the nation move towards the free-market pricing of natural gas.
• The exchange is expected to facilitate transparent price discovery in natural gas, and facilitate the growth of the share of natural gas in India’s energy basket.

About Natural Gas:

• It is the cleanest fossil fuel among the available fossil fuels.
• It is used as a feedstock in the manufacture of fertilizers, plastics, and other commercially important organic chemicals as well as used as a fuel for electricity generation, heating purpose in industrial and commercial units.
• It is also used for cooking in domestic households and a transportation fuel for vehicles.

Source: PIB