Cheaper global gas supply and rising urban consumption could alter India’s energy mix for the better

India’s recent commitment to purchase 10% of its liquefied petroleum gas (LPG) imports over the course of a year from the US to meet the country’s cooking-fuel needs heralds a wider policy approach. It marks the diversification of our petroleum product purchase basket away from traditional proximate sources in West Asia. The move comes amid ongoing negotiations between India and the US that seek to bring greater parity in trade between the two countries.

While it remains to be seen whether the supplies work out cheaper, how do these gel with our medium-to-long-term energy priorities?Broadly, any move away from our traditional suppliers must have strong commercial underpinnings, be it directly or indirectly by way of trade offsets in other sectors. From here on, we can expect an expansion in India’s hydrocarbons trade with the US, especially since the latter has recently approved the setting up of many LNG export terminals. Natural gas, however, remains a minor source of energy in India, at a little under 6% in our energy mix, while it accounts for a quarter of the global energy cauldron.

As much as natural gas purchases from the US will provide a strong negotiating handle, higher domestic consumption offers multiple co-benefits. These include a cleaner energy mix, savings in the national energy bill and enhanced energy security. This is especially so since emissions from natural gas combustion are 20% lower than from diesel or petrol and 50% lower than coal’s.

Also, in energy equivalence terms, the landed price of LNG is 20% lower than that of crude oil. However, higher taxes and mark-ups by intermediaries raise the supply price at the consumption end in some cases. Secondly, domestic piped natural gas offers the