The Oil Ministry's move to ask domestic natural gas users to subsidise costlier imported LNG has come in for sharp criticism from industry bodies who said the plan not only violates competitive market practices but is also against interest of domestic gas producers.
CII and Association of Oil and Gas Operators (AOGO) have even questioned the constitution of an inter-ministerial group (IMG) saying panel is loaded with directors or promoters of private sector Petronet LNG Ltd which will be the beneficiary of the plan.
The IMG headed by Planning Commission Member Saumitra Chaudhri includes Petronet LNG CEO and its representatives of its principal promoters gas utility GAIL India and ONGC. Also, a Joint Secretary in the Oil Ministry, who is a director on Petronet board, is also part of the IMG, thereby loading the panel with people who are in favour of the move.
An inter-ministerial group typically comprises only representatives of various ministries but in case of the IMG looking at subsidising costlier imported LNG by making consumers of cheaper domestic natural gas pay more, includes three board members of private firm, Petronet, they said.
The panel was constituted after Petronet LNG, India's largest liquefied natural gas importer, contracted LNG from Australia at a price that is four times the rate at which most of the natural gas produced from domestic field is sold. The plan is to average out the two prices, to have a uniform rate for both the gas.
CII and AOGO - a body representing almost all of the oil and gas explorers and producers in the country - sent in their separate comments on pooling of gas price to IMG members.
AOGO said the Oil Ministry had in early 2010 commissioned a report by Spanish firm Mercados on pooling of gas. "The trigger for the same is not in public domain. Various stakeholders were asked to respond. Reports suggest that most of the stakeholders had reacted negatively to the proposals in the Mercados report."
Stating that the committee under Chaudhri is second step in that direction, it said "we are not clear whether the committee is going into the merits of pooling, or, whether the need for pooling is a 'done deal' without any debate and only the modalities of its implementation."
AOGO said pooling of gas price will undermine government commitment of allowing gas producers to discover market price.
"By pooling for the first time, we will be extending the subsidy beyond national borders ie subsidise the international LNG/gas producers for increasing their share in Indian markets," it said.
Also, as true cost of LNG shall be masked, there shall be no incentive to improve purchase, transport or supply efficiencies.
