LNG pricing to be reviewed

The tariff commission has been asked to examine the pricing mechanism of imported liquefied natural gas (LNG) supplied as feedstock to domestic consumers. An inter-ministerial group also decided that the government would try to locate LNG sources, other than Qatar, to get better deal.

"We have agreed to refer the question of post landed price cost of LNG to the tariff commission to examine if it is rational," Finance Minister P Chidambaram told reporters after a 90-minute meeting of the inter-ministerial group.

The ministry of petroleum and natural gas and the ministry of power have also been asked locate sources other than Qatar "to discover the real price of LNG", he added.

In a presentation to the inter-ministerial group, the fertiliser ministry argued that the current LNG price did not encourage units to shift from costlier naphtha to LNG and improve their competitiveness. The fertiliser ministry sought a reduction in the regasification cost to below $0.20 per million British thermal unit (MBTU) from $ 0.58 per MBTU at present. It also proposed a cut in the pipeline transportation charges to make the fuel affordable.

Along with the power ministry, it contended that the Petronet LNG Ltd was charging too high a tariff for regasifying LNG imported from Qatar and piping it to plants.

Petroleum Minister Mani Shankar Aiyar said the tariff commission would look into the $ 0.12 per MBTU oil companies were charging on sale of regasified LNG.

If the fertiliser ministry's demands were met, the price of regasified LNG could decrease by $1 per MBTU to $3.42, which is around the same price the private sector gas fields in India sell natural gas.

Fertiliser Minister Ram Vilas Paswan said the 65 million standard cubic meters per day of natural gas produced by the Oil and Natural Gas Corporation would fall to 35 MMSCMD by 2010 and the country would than be forced to reply more on imported fuel, the cost of which was crucial for the economy. "We pay Rs 6,000 crore in subsidies. If the cost of LNG goes up, this subsidy will also go up," he said.

Apart from Chidambaram, Aiyar and Paswan, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Power Minister PM Sayeed also attended the meeting.