Plan panel wants natural gas prices for PSUs to be realigned

Written by Sanjay Jog | Mumbai | Updated: Sep 24 2009, 04:33am hrs
Against the backdrop of ongoing legal row between Ambani brothers and also between NTPC and RIL over K-G gas pricing, the Planning Commission in its recent presentation to the Prime Minister on integrated energy policy has asserted that natural gas prices for PSUs are pegged artificially very low. These prices are as low as $2 per million British thermal unit (mmBtu). Thus, the Commission has argued that these prices need to align with rest of natural gas prices as determined by empowered group of ministers (EGoM). The EGoM in September 2007 had fixed the K-G D6 gas price at $4.20 per mmBtu.

Besides, the Commission has suggested that prices of all commercial energy sources, which are tradable, should be at trade parity at point of sale. This is essential especially when for oil PSUs, prices of petrol and diesel are still under administered regime. Similarly, it has made a strong case for a major overhaul in regulatory regime in upstream and downstream in the petroleum sector.

In case of power sector, the Commission noted that open access provisions under the Electricity Act, 2003 are still not operational and the progress in the development of power generation plants in 11th Plan is slow. The Centre has set a capacity addition target of 78,700 mw by the end of 2011-12. However, the Commission and the power ministry hope that 60,000 mw would be achieved.

In case of renewable and nuclear energy, the Commission observed that policy for incentives promoting capital subsidy based on actual energy generation is required. It has opined that larger use of renewables can reduce coal. However, it would be possible through the creation of a strong monitoring and implementation network, which is currently missing.

Moreover, the Commission has called for a national policy on domestic natural resources as states rich in primary energy resources such as coal, hydro and petroleum feel inadequately benefited. The Commission has suggested that coal can be priced correctly at true economic value by fixing royalty. It has suggested that power can be provided in resource rich states at preferential tariff and equity can be provided to project affected persons and host states. Further, the Centre can consider levying special tax for environment management and infrastructure development to meet the concerns of states.