Inside India’s 16,400 km Gas Pipeline Network – What’s Next?

ELI5 / TLDR

GAIL is the company that owns most of the pipes carrying natural gas around India — roughly 16,400 km of them, about 70% of the national network. Its boss explains why India keeps wanting gas to be a bigger slice of its energy diet (cleaner than coal) but keeps failing to grow that slice past 6%: gas got expensive after the Ukraine war, so power plants and factories won’t touch it, and the only places it’s really booming are kitchens and car fuel tanks where the government keeps the price soft. The whole conversation is one long argument that gas would do better if the government simply forced polluting industries to use it. Plus a side tour through hydrogen, petrochemicals, and why you can’t run gas through a pipe at the wrong pressure.

The Full Story

What GAIL actually is

Start with the plumbing. Natural gas — the stuff that comes out of the ground and burns cleaner than oil or coal — makes up about 6% of India’s energy. The government has wanted that number to be 15% by 2030 for years now. It hasn’t moved. GAIL (Gas Authority of India Limited) is the state-owned company sitting in the middle of this, and it does a lot: it ships gas through pipelines, it imports it, it makes plastics, it pipes cooking gas to homes and fuels cars.

The scale is the headline. GAIL owns roughly 16,240 km of gas pipeline out of about 22,000 km in the whole country — about 70%. It moves 65% of all the gas transmitted in India and sells about half of what the country consumes. In the business of city gas (the network that brings gas to your kitchen and the CNG pump), GAIL and its group hold roughly a quarter. It is, in short, the spine.

The man running it, Sandeep Kumar Gupta, is a chartered accountant — unusual in an industry of engineers. He offers a cricket metaphor for why that’s useful:

“A consultant told me that Chartered Accountants are like a wicket keeper and they can see the direction of each ball coming.”

The point being: an accountant reads risk without being emotionally attached to any one part of the operation.

The thing nobody saw coming: geopolitics

The clearest risk story here is recent and concrete. Before February 2022 — before Russia invaded Ukraine — GAIL didn’t really think about geopolitical risk in its gas supply. Then sanctions hit Russia, Russian gas supply seized up, and one of GAIL’s own long-term contracts was simply not honoured by a supplier. The company ate a large financial hit that year.

“I believe that geopolitical risks have never been so serious to a business, especially those businesses which are impacted by global supply chains.”

This matters because India imports half its gas — from Qatar, the US, Russia, Australia. GAIL has a long-term contract portfolio it recently grew from about 14 million tonnes a year to over 16 million. When supply is global and contracts can evaporate over a war, that portfolio is also a list of things that can go wrong.

Why gas is stuck at 6%

Here is the central puzzle, and it’s a good one. India’s economy has rocketed from the 10th largest to the 5th in a decade. Energy demand is growing fast. Gas consumption is growing too — but only in absolute terms. As a share of the pie, it’s flat, because the whole pie is expanding so quickly. Gas is running just to stand still.

Why won’t gas grab a bigger share? Because it’s losing on price in the places that would move the needle. Gupta walks through the demand by sector:

Fertilizer (about a third of gas use) — basically saturated. Urea plants already run on gas; few new ones are coming.
City gas (about a quarter) — booming, the genuine growth story, limited only by how fast pipelines reach new towns.
Power — the heartbreak. India has 24–25 gigawatts of gas-fired power capacity built and sitting there. Only 8–10 GW of it actually runs. The rest is idle.

The power story deserves a beat, because it explains the whole frustration. Electricity in India is dispatched by “merit order” — think of it like an auction where the cheapest power gets bought first. Since the Ukraine war pushed gas prices up, gas-fired electricity is too expensive to win that auction. So billions of rupees of gas power plants sit dark, and no one builds new ones.

Gupta’s solution, repeated like a refrain, is regulation rather than economics:

“Certain industries, especially the polluting industries, must be mandated to use natural gas because natural gas is at least 50% less pollutant.”

He wants the government to order polluting factories and power plants to burn gas, justified by India’s pledge to hit net zero by 2070. It’s a candid admission: on a level playing field, his product loses. The case for it is environmental, not commercial.

The two-speed market

So you get a strange split. Industrial demand for gas is weak and price-sensitive — it runs away the moment gas gets pricey. But retail demand (homes and vehicles) is strong, almost too strong, because the government keeps those prices soft.

The mechanism is allocation of cheap “APM” gas — domestically produced gas sold at an administered price, currently $6.50 per unit, set to creep up 25 cents a year. Household piped gas gets 100% of its supply at this cheap rate. CNG for vehicles gets about 50%. That subsidy is what lets piped gas and CNG undercut the alternatives (LPG cylinders, petrol).

Gupta makes the consumer pitch for piped gas with real conviction — it never runs out mid-meal, no cylinder to refill, and it’s actually safer:

“Natural gas is lighter than air so it is safer than LPG which is denser than air and accumulates in the case of leakage in the lower areas.”

The honest tension he names: piped gas struggles to beat LPG on price, because LPG is itself heavily subsidised for poorer households and is cheap internationally right now. Convenience and safety, not price, are the sales pitch.

The physics: it’s all about pressure

A nice digression. Ask Gupta what he watches on a normal day and the answer is hydraulics — pressure in the pipes. Water is liquid, so pressure barely matters. Gas is, well, gas, and some customers refuse to take it below a certain pressure. GAIL runs a National Gas Management Centre in Noida plus regional centres whose whole job is keeping pressure right across the network — for customer service and for safety.

There’s also a neat explainer on how gas moves. Gas comes out of the ground as gas. To ship it across oceans, you chill it into liquid (LNG) so it fits in tankers, then turn it back into gas at the destination port — “regasified LNG.” India now has several such ports: Hazira (the biggest), Dahej, Mundra, Kochi, Ennore, Dabhol. Gas produced inside India — from Bombay High, Assam, Rajasthan, Andhra, Tripura — skips all that and goes straight into the pipes as gas. For gas stuck in fields with no pipeline, GAIL built India’s first small-scale liquefaction plant at Vijaipur to truck it out as liquid.

Where the money and the capex go

GAIL is, in Gupta’s framing, “primarily a gas company” even though it’s become a serious petrochemicals (plastics) player too. The revenue rests on three legs: stable pipeline transmission fees, volatile marketing margins (buy gas, sell gas, pocket the spread — depends on the market), and petrochemicals (a big top-line contributor, though margins are depressed right now).

The capex is mostly pipelines — Mumbai–Nagpur–Jharsuguda, the Urja Ganga line nearing completion, Kochi–Mangalore–Bangalore finishing its Tamil Nadu stretch, a new Srinagar–Jammu line won in bidding. On top: a ₹38,000 crore roadmap to hit net-zero on its own operations by 2035 (pulled forward from 2040), petrochemical expansions, and a possible world-scale ethane cracker under study.

One structural detail worth noting: GAIL can’t just lay a pipe wherever it likes. A regulator — the Petroleum and Natural Gas Regulatory Board — assesses demand and either invites bids or hands out the project by nomination. Some of GAIL’s lines came by nomination, some by winning auctions.

The bet on the future

Two forward-looking threads. First, price: Gupta is hoping for relief but isn’t promising any soon. Trump’s pro-drilling stance and a possible end to Biden’s pause on new LNG export approvals could eventually loosen US gas supply — but projects take 2–3 years to come online, so he expects 2025–26 to stay tight and any softening only from 2027. A Russia–Ukraine peace deal freeing up Russian gas would help too.

Second, hydrogen and innovation. GAIL has commissioned India’s first megawatt-scale green hydrogen electrolyser at Vijaipur — 10 MW, making 4.3 tonnes of hydrogen a day. The catch is the pipes: hydrogen makes steel brittle, so GAIL is researching (with IIT, and the UK’s Reena/HSE) whether existing pipelines can carry it at all. And the company, which historically had no R&D arm of its own, is building one — and has bumped its startup funding scheme from ₹100 crore to ₹500 crore, open to any sector, not just gas.

Key Takeaways

India’s gas share of energy has been stuck near 6% for years despite a 15%-by-2030 target — not because gas use is shrinking but because total energy demand is growing faster than gas can be added.
GAIL owns ~70% of India’s gas pipeline (16,240 of ~22,000 km), moves 65% of transmitted gas, and sells ~50% of national consumption. It is effectively the country’s gas spine.
“Merit order dispatch” is the reason 60%+ of India’s gas-fired power capacity sits idle: the grid buys cheapest power first, and post-Ukraine gas is too expensive to qualify. ~24–25 GW built, only ~8–10 GW used.
The whole case for growing gas demand in power and heavy industry is now environmental, not economic — GAIL’s CMD openly wants the government to mandate polluting sectors onto gas, since gas can’t win on price.
India’s gas demand splits roughly: ~1/3 fertilizer (saturated), ~1/4 city gas (booming), the rest industry and power (price-constrained).
Retail gas (home piped gas + CNG) stays competitive only via subsidy — household piped gas gets 100% allocation of cheap administered “APM” gas at $6.50/unit; CNG gets ~50%.
Gas travels as gas domestically but is liquefied (LNG) to cross oceans, then “regasified” at import terminals (Hazira, Dahej, Mundra, Kochi, Ennore, Dabhol). India imports ~50% of its gas.
The daily operational obsession is hydraulics — maintaining pressure across the network, since gas (unlike water) is pressure-sensitive and some customers reject low-pressure supply.
Geopolitical risk became a first-order concern only after Feb 2022: a Russian supplier walked away from a GAIL long-term contract and GAIL took a large one-year hit.
Hydrogen’s pipeline problem is metallurgical — it makes steel brittle — so existing gas pipes may not be reusable for it without research GAIL is now funding.
GAIL pulled its own-operations net-zero target forward to 2035 (from 2040), budgeting ₹38,000 crore for it.

Claude’s Take

This is a competent, slightly defensive CEO interview, and the most useful thing in it is something Gupta probably didn’t mean as the headline: his product can’t compete on price in the markets that matter, so his growth plan is to lobby the government to force people to buy it. He says it plainly and more than once. That’s not a knock on him — it’s an honest read of where Indian gas sits. Gas is caught between coal (cheaper, dirtier) and renewables (getting cheaper, cleaner), and its pitch is “transition fuel.” Transition fuels are useful, but they’re also the thing everyone agrees to use less of eventually, which makes a ₹30,000-crore-a-year pipeline capex program an interesting bet on a fuel whose own champion frames it as a bridge.

The numbers are the value here, and they hang together: 70% pipeline share, the 24–25 GW of stranded gas power, the merit-order mechanism that strands it. The merit-order explanation alone is worth the watch — it’s the cleanest account I’ve seen of why India built gas power plants and then left them dark. The hydrogen-embrittlement detail is a genuinely good piece of the “energy transition is harder than a slogan” story: you can’t just push a new molecule through old pipes.

What’s missing is any pushback. The host is friendly and lets the “mandate industries to use gas” line pass without asking the obvious question — what does that do to the cost of fertilizer, electricity, and steel for everyone downstream? There’s also a whiff of the perennial PSU optimism, where every target gets “advanced” and every pipeline gets “commissioned this calendar year.” Take the timelines with salt.

Six out of ten. Solid primer on the structure of India’s gas business with a few mechanisms (merit order, hydraulics, LNG regasification, hydrogen embrittlement) genuinely worth keeping. Loses points for being an uncontested management monologue with no hard questions and no independent voice.

Inside India's 16,400 km Gas Pipeline Network – What's Next? | Sandeep Kumar Gupta | The Core Report