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| The gas finds in the recent past by Reliance, ONGC and Cairn Energy point to a very vibrant gas market in the next few years.
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| This becomes important especially considering that gas prices are currently regulated at Rs 3200 per standard cubic metre (scm), following a hike of 12 per cent recently.
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| Thus, in the eventual scenario of a free market for natural gas, an increase in availability is of critical importance.
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| The issue of pricing is critical for two industries-fertiliser and power-which use up around 60 per cent of the total gas available.
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| Fertiliser companies have been victims of a lagging fertiliser pricing policy, which meant a considerable deployment of borrowed funds in working capital instead of operations.
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| With the fertiliser sector already having taken a hit in their operations, any increase in gas prices will further worsen matters.
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| Despite being one of the largest consumers of gas, around 80 per cent of the power sector runs on coal.
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| In the event of sufficient availability of gas, it will be easiest for the naphtha-based producers to shift to gas.
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| On the other hand, for existing coal-based producers, the investments in converting to gas-based facility will be considerable and hence, it may not be feasible for such producers to shift to gas-based production.
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| But the power sector is in a deficit state and the Tenth Plan has proposed a capacity addition of 41,000 MW by 2007. Therefore, demand for gas from the power sector will lead to incremental demand.
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| On the supply side, Reliance has estimated its gas find in the Krishna-Godavari basin of around 10 trillion cubic feet to result in gas production of around 60 million scm, equivalent to 96 per cent of current effective supply.
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| Clearly, there is considerable potential for the new gas finds to meet incremental demand of around 150-160 million scm over the next 3-4 years.
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| With supply expected to increase dramatically, the concern of gas prices skyrocketing in a de-regulated environment may not be all that potent.
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| Derivatives Market
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| NSE, the leading exchange for futures and options trading, has taken the lead in introducing contracts on sectoral indices.
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| Starting Friday, NSE has introduced futures and options trading on the CNX IT index. On the first day of trade, CNX IT futures clocked volumes of Rs 44 crore, a fraction of the over Rs 1000 crore clocked on the Nifty futures contract.
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| Actually, the two are hardly comparable, simply because Nifty futures have been trading for over three years.
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| Besides, a broad market index caters to almost the whole market, while an IT index would find interest among IT investors.
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| To start with, volumes of around Rs 44 crore are reasonable, especially considering that most other contracts started off with much smaller volumes.
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| Although Nifty futures were introduced in June 2000, its daily turnover was less than Rs 44 crore till late 2001.
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| Obviously, the derivatives market is at a much more mature stage now, with the overall turnover exceeding the cash market turnover of all exchanges put together. The time was ripe, therefore, to check market interest for products on sectoral indices.
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The fact that NSE chose to go with its IT index only affirms the continuing popularity of the sector, despite the fact that it
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