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High level panel says no to pooling of natural gas price

Last Updated: Monday, September 5, 2011 - 18:29

New Delhi: Reversing its earlier stand, a high-level government committee said that domestic natural gas users cannot be asked to subsidise costlier imported LNG as pooling of natural gas prices was not feasible.
An inter-ministerial panel headed by Planning Commission Member Saumitra Chaudhuri in its draft report a few months back had suggested averaging out price of costlier imported LNG with cheaper domestic gas. The averaging out, called pooling of prices, would have resulted in users of cheaper domestic natural gas pay double the existing rates so that imported LNG could be sold at affordable rates.
But in its final report, which was prepared after extensive consultation with the industry, it said, "The Committee does not recommend pooling mechanism for natural gas at the overall level, nor does it recommend a price pooling on sectoral basis."
Instead, the committee in its August 25 report said preferential allotment of domestic gas to be done to priority sectors of fertiliser and power only and the rest of the consumers like steel plants should be allocated imported LNG.
Domestic gas is currently priced at USD 4.2 to USD 5.5 per million British thermal unit (mmBtu) while the fuel imported in ships in its liquid form (liquefied natural gas or LNG) is priced at USD 10 to 14 per mmBtu.
"These (non-priority) users operate in a market environment where their output prices are market driven with no regulatory burden and hence they should be able to pass on the higher costs of gas feedstock," the report said.
State gas utility GAIL India and Petronet LNG, which were part of the inter-ministerial committee, had been lobbying for pooling of gas prices as LNG currently being imported on a long-term contract from Qatar will cost upward of USD 12 per mmBtu from 2014 while new contract with Australia was priced at USD 14.5 per mmBtu.
"The recommendation put forth here do not envisage any form of pooling at the all-India level cutting across industries," the report said.
"What it does is to preferentially allot available domestic natural gas to fertiliser and power sectors with a certain quantity reserved allotment for the city gas/CNG sector," it said.
The final report called for meeting incremental requirements of the two sectors and keeping usage of imported LNG in the priority sectors to not more than 25 percent.
Non-priority steel plants, oil refineries, petrochemical units presently consume about 18.4 million standard cubic meters per day out of the total domestic gas availability of 110.59 mmscmd. Fertiliser and power sector draw 88.37 mmscmd.

First Published: Monday, September 5, 2011 - 18:29
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