Halving of LNG duty to save Rs 900 cr for consuming industries

The government's move to halve import tax on liquefied natural gas (LNG) in a bid to promote use of the cleaner fuel, will result in Rs 900 crore savings to gas-consuming industries.
A host of industries from petrochemical plants to fertilizer units will benefit from the Budget announcement of cutting import duty on LNG to 2.5 pe cent from 5 per cent currently, Oil Ministry sources said
This, they said, augurs wells to achieving the objective of increasing the share of natural gas in India's energy mix to 15 per cent by 2020 from 6.5 per cent at present.
Government is focused on increasing the usage of natural gas in overall primary energy mix for promoting a gas-based economy in the country. In view of limited availability of domestic gas, there is continuous increase in import of super-chilled natural gas (LNG) in the country.

Import of LNG is allowed under Open General Licence (OGL) scheme and prices are based on international market demand-supply scenario, they said, adding import duty of USD 0.35 per million British thermal unit on a spot LNG price of USD 7 per mmBtu will now halve.
Presently, imported LNG meets about 50 per cent of gas demand of various sectors in the country. The import of LNG is expected to rise in the future for catering to the rising demand of energy for industries, they said.

Sources said abased on LNG consumption in FY 2015-16, the estimated savings to gas consuming industries will be to the tune of Rs 900 crore on account of reduction in customs duty.

The move, they said, will help in making LNG price competitive to alternate fuels and industries will be encouraged to switch over to LNG from liquid fuels.
IG: managing director E S Ranganathan said lowering of customs duty will reduce the fuel's price by 15-17 cents per million British thermal units for industrial and commercial customers.
Spot LNG price in Singapore has risen about 50 percent over the past year, making the fuel unaffordable for many consumers.
Sources said the reduction would benefit petrochemical, steel and fertilizer plants. Power producers were exempted from the import tax since 2012.
The step is credit positive for regasification terminal operators including Petronet and GAIL, K. Ravichandran, group head of corporate ratings at New Delhi-based ICRA, said in a statement.

According to BP India, natural gas at 25 per cent of energy mix in 2030 is 970 million standard cubic meters per day of gas consumption, a seven-fold growth over 2015-16 levels. "To meet this level of demand there has to be a judicious combination of mainly domestic natural gas and imported LNG," it said on its website.
India's gas supply deficit is expected to widen from 78 mmscmd this fiscal year to 117 mscmd in 2021-22, according to a government estimate.