Column : Worth its weight in KG

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: Gas has started to flow from Reliance’s gigantic East Coast discovery. This has significance not simply because of the monetary benefits that will accrue to the company and the government or indeed because of the savings on account of a reduced oil import bill and lowered financial subsidies but also because it will accelerate the shift of our economy towards a ‘cleaner’ energy basket. The significance of the Reliance discovery is that it will compel a broader constituency of interest groups to advocate the benefits of a relatively clean fuel.

Gas is an environmentally preferred fuel to oil and coal. It emits fewer noxious fumes. It is also operationally more efficient and its use will generally result in reduced electricity tariffs.

Notwithstanding we have been slow in establishing gas as the fuel of choice. This is because unlike oil, a gas discovery can only be monetised if the associated pipeline transmission and distribution are in place and the producers and consumers have agreed the terms of the sales and supply contract. Gas is not a fungible commodity and it is not possible under normal circumstances to store it other than for short periods and it has to therefore be consumed upon production (or else flared). Reliance for instance could only commence production after it had completed its 1440 km long East-West gas pipeline and upon finalisation of sales and supply agreements with the various fertiliser and power companies located en route this pipeline and that was built earlier by GAIL.

The Reliance discovery will not of course ease these complexities but it should refocus the policy limelight on the importance of developing a nationwide pipeline infrastructure. Today the South and large parts of Central and North India cannot access gas supplies. This is a constraint on economic growth and in particular power generation. It also compounds the challenge of environmental management.

The opportunity cost of inadequate pipeline infrastructure has risen in recent months because of the sharp decline in the price of liquefied natural gas (LNG). Had the infrastructure been in place potential customers would have had the option of shifting from environmentally polluting solid and liquid fuels to gas on competitive rates.