Comments
A high-powered committee headed by the former finance secretary Ashok Chawla has opposed the Oil Ministry’s plan to subsidise costlier imported LNG by making users of domestic natural gas pay more.
The committee on allocation of natural resources said in its draft report said: “In the ideal scenario, a gas pooling arrangement, with a view to mitigate price volatility is not recommended.’’
The Oil Ministry is pushing for pooling or averaging out the prices of domestic natural gas and imported LNG so that the high cost imported fuel contracted by Petronet LNG finds users.
“Prices should be determined by a market-driven mechanism, with gas being eventually allocated to its most optimal use, based on the specific circumstance of each sector,” it said.
The panel has called for market-determined pricing of natural gas and recommended the use of gas as an industrial fuel and for cooking and transport purposes instead of burning it in power and fertiliser plants.
Subsidised gas should not be provided as an input (feedstock) for power plants since most of the output (electricity) is sold at market price.
The committee felt it was not clear if input subsidies have actually led to lower market prices of power.
“In the short-term, gas does not offer any significant cost advantages for base load power generation compared to coal,” whose reserves are abundant in India, the report said.
The primary goal should be to supply power to the 40 per cent of the country that still does not receive electricity and who are highly cost sensitive, it said.
The report said it would be preferable to continue using cheaper coal for base load power generation to reduce the subsidy impact, it said.
“It may be better to discourage new gas-fired power plants, other than those already committed,” it said.
Stating the intent of the government is also to move fertilisers to a consumer-based subsidy system instead of subsidising the input cost, the committee said subsidising gas as an input for urea plants was a weak strategy.
Power and fertiliser currently consume nearly 75 per cent of the total gas available in the country.
With Rs 2.7 lakh crore being spent on oil imports in 2009-10, the committee felt: “It may be better to use gas to substitute for oil where possible, rather than coal.”
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.