Sweltering heat and policy measures are fuelling a surge in the use of gas-fired power in India, with imports of liquefied natural gas (LNG) forecast to rise sharply over the next two years, industry officials and experts say.

The country's gas-fired power generation doubled in April and May to 8.9 billion kilowatt-hours (kWh) compared with the same period last year, data from Grid India showed, eating into the share of coal-fuelled electricity for the first time since the COVID-19 pandemic.

More than 75% of India's power generation was from coal in 2023, while gas-fired plants have accounted for only about 2% in recent years, largely because of the high cost of gas relative to coal.

In May, coal's share dipped to 74%, compared with 75.2% during the same month last year, while gas's share nearly doubled to 3.1% from 1.6%.

An emergency clause invoked to force operation of idle gas-fired power plants to avoid power cuts during the 43-day federal elections that ended last week also drove gas usage, industry officials said, as power outages have historically been a key electoral issue.

Reuters Graphics

More than 75% of India's power generation was from coal in 2023, while gas-fired plants have accounted for only about 2% in recent years, largely because of the high cost of gas relative to coal.

In May, coal's share dipped to 74%, compared with 75.2% during the same month last year, while gas's share nearly doubled to 3.1% from 1.6%.

An emergency clause invoked to force operation of idle gas-fired power plants to avoid power cuts during the 43-day federal elections that ended last week also drove gas usage, industry officials said, as power outages have historically been a key electoral issue.

"The current growth of Indian power demand suggests the rising need for greater availability (of natural gas) and flexibility will remain a fixture in coming years," said Joachim Moxon, LNG analyst at ICIS. LNG IMPORTS TO RISE

India's gas-fired power output is expected to grow by 10.5% in the fiscal year ending in March 2025, following 35% growth the prior year.

To meet that demand, LNG imports by the price-sensitive buyer swelled in May to the highest levels since October 2020, data from analytics firms LSEG and Kpler showed, despite global prices up five-fold from the pandemic-hit lows of 2020.

Reuters Graphics

Demand for LNG in India, the world's fourth-largest importer of the fuel, is set to increase by 19% in 2024, with imports forecast to reach more than 28 million metric tons in 2025, up from 22.1 million tons in 2023, according to ICIS.

"India's LNG imports will continue to be driven higher by the power sector in at least the next two years," said Victor Vanya, director at Indian power analytics firm EMA Solutions.