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Gas industry: Great potential for long-term structural growth

Lack of a free market and infrastructure in India has constrained the development of the Gas sector. While coal, petcoke and fuel oil are cheaper alternatives, natural gas is more economical than alternatives like diesel and naphtha. Then, there is the added advantage of convenience in terms of continuous supply, consistent quality and no requirement of storage/inventory. However, the current scenario of a monopolistic regime and onerous contracts is discouraging. Several small and medium enterprises prefer to stay away from usage of natural gas, even if it means higher cost and inconvenience. Going forward, emergence of new market players would increase the options for the buyers and aid the development of the sector. The regulatory board is also looking into unbundling of transmission and marketing, which could further open up the sector for smaller players. The Gas industry is all set to see the transformation that the Telecom industry has gone through in the last two decades (Exhibit 1).