Gas plants fall idle as India’s power mix shifts

High fuel costs and poor competitiveness have left 8GW of gas power capacity stranded.

India’s gas-fired power sector is under mounting pressure, with nearly a third of its total gas capacity rendered idle in FY2025, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).

The report revealed that 31 gas-fired power plants, amounting to nearly 8 gigawatts (GW) or 32% of the country’s gas power fleet, generated no electricity in the last fiscal year. In April 2025, 5.3GW of that idle capacity was retired due to inoperability—highlighting what IEEFA called an alarming growth in stranded assets.

“Gas-based electricity generation has dwindled from a peak of 13% in 2009–10 to just 2% in the last fiscal,” said Purva Jain, Energy Specialist, Gas & International Advocacy at IEEFA. “This is because gas is unable to compete with other cheaper resources due to lower than expected domestic gas production and the volatility in global energy prices.”

Jain noted that gas-fired power is losing out to increasingly competitive renewables. “Even if delivered LNG is priced at $8/MMBtu, the cost of electricity would be ₹17 per unit—compared to ₹5–₹6 per unit for coal and ₹6 per unit for solar-plus-storage,” she said.

The underperformance isn’t limited to power plants. Six out of seven operational LNG terminals in India ran at below 50% capacity in FY2025. “Due to high LNG prices, lack of demand, and site-specific operational challenges, demand growth barriers could trigger stranded asset risk for energy terminals,” said Jain.

Regulators are responding. The Petroleum and Natural Gas Regulatory Board has issued new rules aimed at aligning terminal expansion with actual demand, addressing location suitability, and ensuring sufficient pipeline capacity.

In industrial sectors, volatile gas prices continue to drive users toward cheaper alternatives—even dirtier fuels. “Switching from coal to gas has been witnessed in some small to medium scale industries, like tea plantations,” said Jain. “But for heavy industries, gas demand may remain limited as companies rely on cheaper coal.”