India’s First Gas Exchange – Burning Issues

Table of Contents

What Is an Exchange?

An exchange is a marketplace where securities, commodities, derivatives and other financial instruments are traded.
The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange.
An exchange may be a physical location where traders meet to conduct business or an electronic platform.
Trading is increasingly being conducted on electronic exchanges.

Similarly there are exchanges where Commodities are exchanged on online platforms.

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.
The gas exchange will be managed by
India Energy Exchange.

Power trading exchange regulated by the Central Electricity Regulatory Commission(CERC).

For the time being trading will take place only in imported natural gas across three hubs
Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.

The price of domestically produced natural gas is decided by the government.
It will not be sold on the gas exchange.
However, following appeals by domestic producers that the prices set by the government are not viable given the cost of exploration and production in India,
Petroleum Minister Dharmendra Pradhan has indicated that a new gas policy will include reforms in domestic gas pricing, and will move towards more market-oriented pricing.

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.
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 basketfrom2% in 2018 to 15% by 2030.