GoM to take up duty cuts on LNG

The Cabinet has referred the proposal of according declared goods status in principle to natural gas and cutting Customs duty and domestic levies on liquefied natural gas, to a group of ministers headed by Union Power Minister Sushilkumar Shinde.

The ministerial group (GoM) is likely to meet shortly to discuss the power ministry's proposal that is aimed at partly resolving the gas shortage faced by power generation plants in the country.

"The proposal was discussed in the Cabinet and it decided to refer the matter to a Group of Ministers. While import duty is to be reduced to zero from the present 5 per cent, there is also a proposal to accord declared goods status to natural gas. This will lead to enhanced supplies and allow power plants to reach full production," a power ministry official told Business Standard.

The power ministry believes that as fuel price constitutes around 60 per cent in thermal power generation, the fuel cost of generation (FCoG) based on natural gas or liquefied natural gas (LNG) needs to be at par with other competing fuels like coal for long-term sustainability.

This can be achieved by waiver of Customs duty and granting declared goods status to LNG, RLNG and natural gas, in line with coal.

"Any loss of revenue on account of Customs duty waiver will adequately be compensated by way of additional taxes generated through increased economic activity arising from more power supply," government sources added.

The current availability of natural gas in the country is around 91 million metric standard cubic metre per day (mmscmd).

The present power generation capacity based on gas and liquid fuel is around 12,530.62 Mw, of which 10,513.62 Mw is gas and 2,017 Mw is from more expensive liquid fuels like naphtha.