Govt panel to advise on gas pricing, allocation

GoM’s committee on graft to also suggest norms for coal, mining bids

With distribution of natural resources becoming a contentious issue, the high-level committee announced in February by the Group of Ministers (GoM) asked to examine the issue of corruption and what could be done to better address it, is to also give suggestions on allocation and pricing of natural gas.

The committee was meant to examine an open and competitive mechanism for allocation, pricing and utilisation of natural resources. It is to come out with a report in a month’s time, and is expected to spell out an architecture so that “discretion is fettered within a broad framework”. Coming out with such a framework for subjects within the jurisdiction of state governments, such as water and land, is expected to be difficult.

The committee (it comprises both officials and people from industry) would also suggest measures for overhauling bidding norms for coal and mining sectors, with the purpose of making it more transparent.

A senior official told Business Standard the committee found that bidding norms for oil and gas blocks under the New Exploration and Licensing Policy (NELP) had worked well. “The policy regime has worked fine for the last 15 years. Though big overseas company have not taken part, the industry is satisfied with the policy framework,” said the official.

Even in the case of bandwidth allocation, the auction system adopted for third-generation spectrum and broadband wireless spectrum has worked well, despite the controversy surrounding the 2G spectrum, said the official.

Explaining the reason for going into the issue of pricing and allocation of gas, the official said this was required since a framework for this was absent. “Though the allocation and pricing has been done by an empowered GoM, it is discretionary in nature. There is a need to remove discretion and administrative influences.”

Besides, pricing gas low since the industries using it—fertiliser and power—are subsidised, encourages concealed subsidy.

The committee also considered changes proposed in the allocation of mines like adopting the auctioning route for mines only where reserves have been established and not where prospects of minerals are nebulous. “The general refrain is that auctioning is the best option because it avoids the scope for maneuvering,” he said.

The government had yesterday come out with draft guidelines for auctioning coal blocks. It gave four models for selection of successful bidders during the multi-step auction process. That included upfront payment, production-linked payment, upfront payment with priority for development status of the end-use plant and production-linked payment, with preference for development status of the end-use plant in the power, cement and steel sectors.

In the past, the Union ministry of coal awarded linkages through an administrative committee. For other minerals like iron ore and bauxite, rights are given out by the state governments. “The regime in coal and mining segments seems to be at odds with what the government expects,” said the official.