PNG Drive 2.0 Must Be Demand-Led, Not Just Pipe-Led
Turning infrastructure into sustained gas usage requires front-loaded demand support, smarter rollout sequencing, and fiscally disciplined regulation
A background note can be accessed here: PNG Drive 2.0: Accelerating India’s Transition
Dinesh Kumar Gautam: Founder, Drishti Foundation Trust
SDG 7: Affordable and Clean Energy | SDG 11: Sustainable Cities and Communities
Ministry of Petroleum and Natural Gas
PNG Drive 2.0 seeks to expand household and business connections at scale. What demand-stimulation mechanisms are most effective in lowering adoption barriers without creating unsustainable fiscal or commercial risks?
For PNG (Piped Natural Gas) Drive 2.0 to convert network expansion into sustained demand, affordability constraints must be tackled upfront rather than through permanent price suppression. Deferred connection charges, recovered through monthly billing, lower both liquidity and psychological entry barriers for households and MSMEs without imposing recurring fiscal burdens or distorting tariffs. Targeted subsidies for economically vulnerable households, instead of universal discounts, avoid regressive cross-subsidisation while protecting city gas distribution (CGD) balance sheets.
Demand acceleration also hinges on addressing last-mile usability constraints. For commercial and industrial users, limited-period introductory tariffs can catalyse fuel switching. Once capital investments are sunk, reliability and operating cost advantages will anchor long-term demand. When complemented by credible communication on cleaner air, supply reliability, and cost stability, these measures allow demand to grow organically, supporting the sector’s collective goal of achieving 15 percent share in India’s primary energy mix.
Scaling PNG requires coordinated last-mile infrastructure build-out by city gas distribution entities. How should regulators and planners sequence network expansion to optimise network utilisation and returns while avoiding stranded or underused assets?
Scaling PNG efficiently requires infrastructure rollout to follow credible demand signals. Regulators and planners should prioritise dense urban centres, industrial clusters, and transport-linked commercial nodes, where anchor loads can quickly improve utilisation and cash flows. A hub-and-spoke sequencing strategy, building out from high-load nodes before extending to semi-urban areas, would reduce the risk of underused or stranded assets while improving investment efficiency.
Within each geographical area, emphasis should shift from uniform coverage deadlines to phased, milestone-based expansion, allowing CGD entities to have flexibility in capital deployment while maintaining regulatory accountability. Cost pooling across urban and peri-urban segments can support equitable access without weakening investment incentives. Equally critical is coordination between trunk pipelines, liquefied natural gas (LNG) import capacity, and city gas networks to prevent supply–network mismatches. Under the oversight of the Petroleum and Natural Gas Regulatory Board, prioritising load density followed by geographical requirements will maximise network utilisation, financial sustainability, and long-term returns.
PNG Drive 2.0 relies on a mix of regulatory facilitation and implicit cross-subsidisation within gas distribution networks. What market-design and regulatory choices are necessary to ensure rapid PNG expansion remains fiscally prudent and competitively neutral?
PNG Drive 2.0’s reliance on regulatory facilitation and cross-subsidisation within networks demand clear safeguards to preserve fiscal prudence and competitive neutrality. Cross-subsidies must be explicit, capped, and transitional, rather than implicit or open-ended. Two-part tariffs, combining a fixed network charge with a transparent volumetric price, enable predictable cost recovery while preserving efficient consumption signals. Clear ceilings on cross-subsidisation within each geographical area, coupled with a defined glide path for tapering support as volumes scale, prevent permanent distortions across consumer classes.
Public risk-sharing should focus on early-stage demand uncertainty instead of price support. Time-bound viability gap funding or performance-linked incentives in low-density areas can de-risk initial investments without embedding long-term fiscal liabilities. Regular tariff reviews, cost benchmarking, and disclosure requirements further guard against overcapitalisation. Together, these regulatory interventions and market-design choices allow rapid PNG expansion with financial prudence, and aligns well with India’s objective of decarbonisation while remaining globally competitive.
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