Priority allocation of natural gas only to fertiliser sector: Plan panel

In a new turn of events, the planning commission has recommended priority allocation of natural gas for fertiliser sector, leaving power sector for gas pooling along with other industry sectors.

Earlier it had recommended natural gas to be provided at subsidized price out of the general pool for sectors like fertiliser and power both.

Technically, fertiliser will continue to get gas at a price decided under Administrative Price Mechanism (APM) of the government.

However power sector will get natural gas at a price decided at the market rate. It could be noted that the cabinet committee few weeks back revised the APM price for natural gas has to be priced at $ 8 mmbtu from April 2014.

For customers in the North-East, 40% of the price would be provided as subsidy by government. The price of natural gas produced by national oil companies, namely, Oil & Natural Gas Corporation Ltd (ONGC) and OIL India Ltd (OIL), from their nomination blocks is sold at APM price. This price was last revised in 2005.
 
However power ministry has refused to go for general pool as companies generating electricity have already entered into long term contracts with gas producers at old rate. These rates cannot be revised as per the terms of the contract, said official sources close to the development.

The petroleum and natural gas ministry has recommended allocation of APM priced natural gas to both fertiliser and power sectors.

However officials explained further that the gas pooling is a notional pool where price of domestic gas and imported gas will be averaged out.  Out of the total available stock of natural gas in India, 50% is priced as per APM and rest is proposed to be priced as per the general pool.

The press note on APM price revision for natural gas stated that it would impact the cost of power only marginally while the selling price of fertilisers is likely to be unaffected. The revision in APM price would encourage further investment in exploration and production, thus enhancing gas availability and ensuring energy security.

Currently, the fertiliser and power sectors get 29.4 and 17.5 million metric standard cubic meter per day of gas, respectively.

A drastic decline in production of gas from the Krishna-Godavari D6 block operated by Reliance Industries has meant intermittent supplies to power plants over the last two years. Reportedly, the flow even came to a standstill in March.

The power ministry also expressed apprehension that states would criticise pooling since it would lead to the public sector subsidizing the private sector. States have also opposed proposal to hike APM gas price.