Following divergent views among various government wings and user industries, the Ashok Chawla panel on pricing and use of natural resources is likely to drop its proposal for a designated natural gas trading agency to buy the clean fuel from gas producers at contracted prices and sell it to customers at market rates. This proposal in the committee?s draft report would not find place in its final report.
Implementing the original proposal would have let the agency (the mantle would most certainly have fallen on GAIL India) profit from the difference between the market price and the rate fixed by a ministerial panel. The proposal was also at odds with the wishes of the oil ministry, which favoured gas price pooling so that those who now get gas cheaper subsidises those buying at higher rates.
India, the world?s 13th largest gas economy, has a 70-billion cubic metre gas market, estimated to grow at 8% a year over the next decade.
The oil ministry wants gas to be available to all customers at a weighted average of all prevailing prices so that no consumer is at a disadvantage that distorts the market. Now, domestic gas price ranges from $4.2 to $5.65 per unit, while imported LNG ? particularly spot cargo ? is far more expensive, particularly after the Japanese crisis. Also, the gas price heterogeneity prevents the freeing of urea price for fear that those getting cheaper gas would undercut other producers and drive them out of the market.
The Chawla panel had also recommended in its draft report that the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB), be entrusted with gas pricing, now administered by a group of ministers.
When asked for comments, petroleum minister S Jaipal Reddy told FE: ?The various recommendations of the Ashok Chawla committee will be considered by the Union cabinet.?
Oil ministry sources said they would like the Chawla panel to recommend de-linking of gas price from crude oil as gas has a separate cost structure as well as demand-supply mechanics. Now, gas price is linked to crude as both commodities are substitutable and their prices move in the same direction over a long period. The oil ministry too wants a more efficient pricing of gas ? which would depend solely on its demand and supply ? once the gas market matures and there are enough pipeline networks. The Chawla panel is expected to arrive at a consensus on these issues in its final report. Sources also said that diverse views among departments could delay the public release of the final report.
Meanwhile, the ministry of mines has disagreed with the Chawla panels suggestion that mining licenses be auctioned from the initial exploration (reconnaissance) stage itself to attract more investor interest. The ministry is of the view that doing so would be counter-productive as investments are hard to come by at the exploration stage. The ministry favours auction only for fully prospected mineral deposits.
The fertiliser ministry too is planning to go ahead with ?notional price pooling? of natural gas as recently recommended by the Saumitra Chaudhuri panel on the fertiliser sector. The oil ministry has informally endorsed notional price pooling for fertiliser as a simple billing system without complexities.