India’s small and medium businesses drive natural gas demand: IEEFA

Their gas consumption surged by 136% in fiscal year 2023-2024.

A new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) revealed that India's small and medium-sized businesses are one of the largest consumers of natural gas in the country, which calls for the need to shift focus on cleaner options to prevent long-term risks. 

Purva Jain, an energy specialist at IEEFA, said small and medium-sized industries like tea plantations, manufacturing, LPG shrinkage, and sponge iron are the second-biggest consumers of natural gas in India, after fertilisers. Their gas use grew 136% to 16,639 million metric standard cubic metres (MMSCM) in the fiscal year (FY) 2023-2024 from 7,060 MMSCM in FY 2019-2020.

“Small-to-medium scale industries have taken advantage of low domestic natural gas and liquefied natural gas prices to use them in their production processes. However, such fuels carry the risks of price volatility, import dependence, limited domestic production and expensive infrastructure,” she said. 

Jain said small and medium-sized businesses could reduce their reliance on gas by improving energy efficiency and using more renewable energy. Some of the alternatives that they can use are electricity, green hydrogen, and biogas, she noted.

Specifically for tea plantations, using tea waste and garden waste can also help produce compressed biogas, which has the same methane content and calorific value as natural gas and is a cleaner alternative, she explained. 

IEEFA also suggested blending hydrogen with piped natural gas in industries that depend on it. India's largest power company, NTPC, has already implemented this in Surat and Solapur. Green hydrogen could also be a good alternative for the sponge iron sector as a reducing agent for producing direct reduced iron.

The report also recommended using electric heating powered by renewable energy instead of natural gas-based heating for glass manufacturing, tea plantations, and ceramic production.

“Improving energy efficiency can play a critical role in lowering carbon emissions in industries like ceramics and glass. Many small or unorganised industries that use natural gas for heating suffer massive heat loss and release of pollutants due to inefficient combustion,” Jain said.