Review of LNG import sops likely

 The concessions, domestic producers of natural gas have been arguing, have put them at a disadvantage vis-a-vis LNG importers.

 While the petroleum ministry was opposed to any withdrawal of concessions, the finance ministry was learnt to be in favour of reviewing the concessions in the light of the changing natural gas scenario in the country, sources said.

 This will have implications on the LNG import policy, which has been sent to the Cabinet for consideration.

 In the Budget, the government had the reduced duty on the import of LNG and on equipment used for construction of LNG terminals.

 The domestic producers say that while LNG imports face a duty of 5 pert cent, they pay a 10 per cent royalty on domestically produced natural gas.

 This, according to the local producers, is causing a heavy loss of revenue to the exchequer.

 As under the New Exploration Licensing Policy (NELP), 70 per cent of the revenue earned from domestic natural gas goes to the government in the form of taxes.

 Therefore, if Oil and Natural Gas Corporation (ONGC) produces natural gas from a field allotted to it under NELP, 70 per cent of the revenue would go to the government and the remaining 30 per cent to ONGC.

 In case the gas is produced by an Indian company which has a 10 per cent foreign holding (as in the case of Reliance-Niko combine), 70 per cent will go to the government and 30 per cent to the two private companies.

 In the share of gas with the companies, 27 per cent will go to the Indian partner and 3 per cent to the foreign partner. This means that 97 per cent of the revenue will remain within the country.

 This is in sharp contrast to the LNG import, where the exporter would be paid 100 per cent of the cost in foreign exchange.

 The domestic producers have been arguing that the government should discourage LNG imports in view of the projected availability of natural gas within the country after the recent gas discoveries by Reliance and Cairn Energy.

 According to the domestic producers, the government should also consider the multi-billion deep-sea exploration programme undertaken by ONGC, which is expected to discover hydrocarbons in the deep waters on both western and eastern coasts of India.