Gas Pooling

Suppose a housing society buys electricity from two sources, a cheap old rooftop solar setup and an expensive backup diesel generator, but instead of billing each flat differently depending on which source happened to be running at that hour, the society simply averages the total cost and charges every flat the same predictable rate. Gas pooling applies that exact logic to natural gas.

India's domestic natural gas, priced under the government's administered formula, is comparatively cheap. Imported LNG, regasified at terminals like Dahej or Hazira, is usually a good deal more expensive and far more exposed to volatile global prices. A consumer connected only to a domestic gas source pays one price, while an identical consumer who happens to be served mostly by imported LNG could pay a much higher one, purely as an accident of pipeline geography rather than anything about how they use the gas.

Gas pooling was designed to remove exactly that accident. Under a pooling mechanism, gas from multiple sources, cheap domestic supply and costlier imported LNG, is combined and averaged into a single blended price, which is then charged uniformly to a defined set of consumers regardless of which specific molecules actually reached their pipeline. It was first applied seriously to the fertiliser sector, where feedstock gas cost directly affects urea prices and subsidy bills, and has since been extended in various forms to help City Gas Distribution networks offer more stable CNG and PNG pricing as they expand into areas with less reliable domestic gas supply.

The trade-off is straightforward. Pooling smooths out price volatility and geographic unfairness for consumers, but it also mutes the price signal that would otherwise tell the market exactly how much of the gas being used is actually the cheaper domestic variety versus the costlier imported kind.

Whenever a fertiliser company or a city gas distributor talks about its feedstock or sourcing cost holding steady even as global LNG prices swing, gas pooling is very often the quiet mechanism making that stability possible.