The discrepancy between price of gas, produced from Nelp blocks, for higher-end industrial consumers, such as steel and cement sectors, and priority sector (power and fertilisers) is all set to correct.
The ministry of petroleum and natural gas is considering a major amendment in its draft gas utilisation and pricing policy and has proposed a uniform gas price for all industrial sectors. The modified gas utilisation and pricing policy will be shortly put up for approval of the empowered group of ministers (eGoM) on gas pricing.
Official sources revealed that the petroleum ministry had earlier proposed that the price of natural gas be kept more for higher-end industrial consumers than the price of gas for priority sector.
However, this position would have meant a clear departure from the eGoM?s decision, taken on September 12, 2007. The eGoM, while approving the gas pricing formula of Reliance Industries, had decided that the price discovered through the open-market process shall apply uniformly to all the consuming sectors.
Sources said although the guidelines in the gas utilisation policy aim at the contractor following the prescribed priority list, however, if the price of gas is kept higher for industrial consumers other than those in the priority sector, it would impact gas utilisation as well. This is because the contractor would be supplying gas at higher price to customers lower down in the priority list.
?So it would be in the interest of the contractor to avoid supplying gas to higher priority customers (like fertilisers and power) in favour of lower priority customers (like steel). As it is not feasible for the government to police economic activities at every step, it is felt that it would not be advisable to put in place a system where the contractor is incentivised to violate the priority list prescribed in the policy,? a senior petroleum ministry official said.
Alongside, the petroleum ministry under its the gas utilisation policy has recommended that the first priority for gas be given to existing fertliser plants followed by LPG and petrochemical plants and then power plants. The next priority is for city gas distribution followed by existing refinery projects and other industries.
Once the gas demand from existing units has been satisfied, the gas should be utilised for greenfield projects. The order of priority is first to fertiliser plants followed by petrochemical projects then to CGD, refineries and power plants, respectively.
Another significant policy tenet laid by the petroleum ministry to see that marketing priority does not become a ?reservation? is that consumers belonging to any of the priority sectors should be in a position to actually consume gas as and when it becomes available and if consumers in a particular sector are not in a position to take gas when it becomes available, it would go to the sector which is next in the order of priority.
Also, as per the gas utilisation policy, the priority for supply of gas from a particular source would be applicable only amongst those customers who are connected to existing and available pipeline network connected to the source. So if there is a marginal or small field that is not connected to a big pipeline network, then the contractor would be allowed to sell the gas to customers who are connected or can be connected to the field in a relatively short period, proposed as three to six months.
