Natural gas sector growth hit by pricing, mktg policies: Report
"The gas sector in India holds tremendous potential. However, its growth is constrained due to pricing and marketing policies of the government with respect to gas produced domestically," the joint paper titled 'Rising above the sub-optimalExploring ways to find energy solutions' said.
The government not just fixes the price of domestically produced gas but also determines who it should be sold to.
Gas produced by PSUs and Reliance Industries is priced at USD 4.2 per million metric British thermal units (mmbtu), whereas gas produced from some of the blocks has been allowed to be sold at slightly higher rate.
"This has caused a sense of uncertainty in investors' minds," it said also identifying absence of market-determined pricing mechanism as a constraint.
"The government has not been able to attract investors in the exploration and production sector due to uncertainties in areas of pricing and allocation of hydrocarbon resources, complexity in granting of approvals and various clearances, interpretation of the terms of the production sharing contracts (PSCs) and other framework agreements," it said.
Indian consumers, it said, are artificially insulated from the vagaries of international pricing by the government-controlled pricing regime.
"This leads to inefficient use of energy owing to the lack of appreciation for real economic value of fuel," the paper said. "Unfortunately, the absence of free markets acts as a disincentive to investors, consequently resulting into a weakening of the supply
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