How India’s Natural Gas Market Works — And Why It Matters for Investors

At first glance, this seems surprising. India already has LNG terminals, an extensive gas pipeline network, and city gas infrastructure covering almost the entire population. So why isn't gas trading booming? The answer lies in policy rather than infrastructure. More than half of India's domestically produced gas is sold under the Administered Pricing Mechanism (APM), where the government decides both the price and the buyers. This gas is primarily allocated to priority sectors such as fertilizers and city gas distribution, leaving very little available for market-based trading. Only gas produced under newer licensing policies enjoys greater marketing freedom. Even then, exchange trading is limited, with most volumes still sold through long-term bilateral contracts. Although importers can freely sell LNG, nearly 75% of imports arrive under long-term contracts, reducing the amount available for spot trading on exchanges. This explains why India's gas ecosystem appears modern while its trading volumes remain relatively small. Why does this matter? As India expands manufacturing, increases industrial gas consumption, and transitions toward cleaner energy, demand for transparent gas pricing and liquid trading platforms could gradually increase. • Indraprastha Gas (IGL)

– Higher city gas demand and CNG adoption. • Gujarat Gas – Industrial gas distribution leader. • Petronet LNG – India's largest LNG importer and regasification operator. • Oil & Natural Gas Corporation (ONGC) – Domestic natural gas producer. The real story isn't just about gas. It's about how policy determines markets. Infrastructure creates capacity, but pricing freedom creates liquidity. As India's gas market gradually liberalizes, the companies connecting production, transportation, imports, and end consumers could be among the biggest structural beneficiaries.