The Chemical Industries Association has sought the withdrawal of a recent notification on natural gas price as per the Rangarajan panel.
The decision will cost the exchequer around Rs 10,000 crore per annum through additional subsidy burden on urea/fertilisers and lead to a sharp increase in the cost of power production, said NS Venkataraman, secretary, Chemical Industries Association.
“The notification would result in near doubling of the natural gas price immediately, that would contribute to steep increase in the cost of production of urea/fertiliser and power produced from natural gas. The increase in cost of production of urea would lead to additional subsidy burden for the government to the extent of not less than Rs 10,000 crore per annum. The price of power will have to increase considerably, that will have adverse multiplying effect in the national economy and result in serious problems of cost push inflation,” he said.
“Considering past experience in gas exploration, it is extremely difficult to be highly optimistic about the future production prospects of gas whatever may be the price offered to the producers and one?s fingers have to be kept crossed. Even with the present price of around $4.2 per mmbtu, the production of natural gas has been increasing at around 3.8% per annum on an average during the last 10 years. Such production increase has been largely due to the efforts and contribution of public sector organisation like ONGC. The efforts of ONGC would continue and ONGC has not incurred loss in the past in its gas exploration efforts,” he pointed out. Recalling the past, he said out of 254 blocks awarded for gas exploration to various companies since 1999 under NELP scheme, only three blocks have been successful and even in these blocks, the production of natural gas has not been prolific.
Explaining in detail, he said several urea fertiliser plants are now facing natural gas shortage and are using costly substitute such as naphtha feedstock. Indian urea production is now stagnant at around 22 million tonne per annum and no urea project has been set up in the country for the last 12 years. Around 9,000 mwof natural gas-based power projects, involving an investment of around Rs 50,000 crore, are now stranded due to want of natural gas.
According to him, there are excellent prospects for reducing the demand for natural gas in the country by opting for offshore wind power projects in a big way. India can set up offshore wind power projects of capacity 100,000 megawatt along its 7,000-km long coastal line. The European Union has shown the way. There are great prospects for algae biofuel projects in India, where biofuel, methane gas/power can be produced in a big way. The US and other developed countries are now showing the way. There are also possibilities of setting up coal gassification projects to produce coal gas for use as substitute for natural gas.China has shown the way, he added.