The draft policy on liquefied natural gas (LNG) transportation has been referred to the committee of secretaries (CoS) for vetting before being cleared by the Union Cabinet.
Official sources said a final Cabinet clearance of the policy could be expected around the budget, after some of the amendments proposed in the Merchant Shipping Amendment Bill is cleared in the coming session of Parliament.
The members of the CoS includes secretaries of the department of shipping, ministries of power, petroleum, fertilisers and finance.
The reference to the committee comes close on the heels of the global tender flotation by Petronet LNG for prequalification of shipping gas from the Gulf to Dahej in Gujarat and Cochin in Kerala. One of the major issues in this policy is fixing the minimum age limits for LNG vessels and ensuring that domestic shipping companies have a share in the business.
The sources also said one of the suggestions laid down in the policy is to allow Indian shipping firms involved in LPG transportation to participate in LNG tenders, since the former also require highly specialised carriers. These companies are Shipping Corporation of India, Great Eastern Shipping and Varun Shipping.
The sources said fixing minimum age norms were necessary since there was some surplus LNG tonnage in the global market of over 10 years and above. "These vessels will be in a position to quote lower tariffs than Indian companies," they added. Besides there was a possibility not following safety standards strictly.
The surplus tonnage is on account of defaults which have taken place in the Pacific and some of the South-East Asian countries and untied tonnage. Untied tonnage refers to shipping companies which have LNG vessels not tied to any contractual obligation.
However, the bulk of the LNG vessels have already been contracted though some brokers have been projecting surplus tonnage in the market in view of further defaults taking place in South Asia.
LNG vessels are acquired only if there is an assured off take of LNG for a particular period of time. The contract is signed for 20 years, ensuring an assured cash flow for the operators.
The sources said LNG expansion would be necessary, especially to prevent forex outflows and to keep tariffs the barest minimum levels for public sector undertakings. It is only after the creation of this fleet that imports could be made on an FOB basis and eventually have a fleet of domestic LNG carriers, they added.
This demand for reservation has been supported by the Indian National Shipowners Association (INSA) for reservation of LNG exclusively for transport by domestic shipping companies or through joint ventures in view of certain strategic considerations.
One of them is that excessive reliance on foreign vessels could lead to high prices of end-products. Also, the domestic shipping industry sees LNG as a potential source of long-term revenue. So far only one contract has been worked out for LNG transportation for Dabhol Phase-II for 10 years.
