Oil min will not micro-manage natural gas sale

Despite the Supreme Court?s endorsement of the government?s right to have the final say on the pricing and allocation of natural gas, the petroleum ministry has decided not to exercise this right on the sale of natural gas to small consumers.

The petroleum ministry or the group of ministers deciding on the gas pricing and utilisation policy will not specify the terms of sale to consumers such as small power plants that require less than 50,000 standard cubic meters a day, said a government official.

This means that gas distributors such as Indraprastha Gas and Mahanagar Gas would not face interventions from policymakers on their choice of small and medium sized industrial and commercial consumers as per the demand supply situation. These consumers include power producers, commercial establishments and hotels.

The distributors also would be free to add costs such as transportation charges while selling gas. Gas is available to the distributors at different prices depending on the source of production as the production sharing deeds between producers and the government were signed at different points in time.

The contracts allow the producers to discover a price which has to be approved by the government. But the May 7 Supreme Court verdict that said that the government is the sole owner of natural gas till it reaches the consumer and that the empowered group of ministers? decisions on price and utilisation would apply to all supplies of natural gas raised the concern that the government may be tempted to micromanage the sale of gas to even small customers.

Ernst & Young?s oil and gas expert and partner, transaction advisory services Ajay Arora said that although the apex court verdict upheld the government?s supreme power to decide the price and allocation of gas, it would be practically difficult for the state to decide on the terms of sales to the numerous small industrial and commercial consumers.

The petroleum ministry is now awaiting the power ministry?s inputs for preparing the gas utilisation policy for new power and fertiliser plants. The existing utilisation policy is for plants that are operational now.