Mumbai, March 24 (IANS) As the government aims to transform the nation into a gas-based economy, the contribution of city gas distribution (CGD) is projected to increase to 25 per cent by 2030, from 20 per cent in FY24, according to a report released on Monday.

Gas consumption volumes for the sector are likely to grow at a cumulative average growth rate (CAGR) of 10 per cent during FY25-FY30, supported by capital expenditure (capex) of Rs 30,000 crore during FY25-FY27.

The CGD sector ranked as the second-largest consumer after the fertiliser industry in India's overall natural gas consumption in FY24, according to the report by CareEdge Ratings.

Historically, CGD consumption has demonstrated steady growth, with a temporary decline in FY23 amid a sharp rise in natural gas prices following the Russia-Ukraine conflict. However, demand recovered in FY24.

"In the CGD consumption mix, CNG is expected to continue dominating volumes, supported by growth in CNG-powered vehicles and complemented by an increase in refuelling stations," CareEdge Ratings Assistant Director Tej Kiran Ghattamaneni said.

The PNG-D penetration has enormous potential, with its share compared to LPG at only 1.5 per cent-2 per cent in the South, East, and North-East parts of the country.

While the targets set for PNG-D connections appear optimistic, even partial delivery would drive rapid growth in gas demand.

"Addressing challenges related to timely approvals, trunk pipeline expansion, and connection to the national grid, as well as last-mile connectivity, shall be a prerequisite for the successful augmentation of the planned infrastructure in the sector," said Ghattamaneni.

The government aims to transform the nation into a gas-based economy and achieve a 15 per cent share of natural gas in the primary energy mix by 2030, an increase from its current level of 6.5 per cent (as of 2024).

In this context, the city gas distribution industry plays a crucial role in enhancing the contribution of natural gas to India’s energy mix by ensuring efficient last-mile connectivity to consumers, said the report.

The government's push towards increased access to cleaner fuels, along with favourable policy decisions such as the establishment of the Indian Gas Exchange (IGX) and the implementation of gas pricing changes based on the Kirit Parikh Committee's recommendations, are some of the prominent regulatory enablers for the sector.