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If there is one sector where the Narendra Modi government seems to have assured investors of policy continuity, it is the petroleum sector. The performance of the petroleum and natural gas ministry, under Dharmendra Pradhan, in the first 100 days of the government has been more of policy stability than of innovation.
Although the government is yet to make up its mind on the gas price guidelines notified by the previous United Progressive Alliance (UPA) government in January 2014, it has refrained from making any drastic changes or revision in prices of cooking gas and kerosene, despite global crude oil prices shooting over $115 per barrel. However, a fall in global prices helped oil marketing companies bring down the petrol price by Rs 3 a litre.
The ministry also managed to oversee completion of seven projects with investment of Rs 26,000 crore in the upstream sector over the past three months. Additional 10 projects of Rs 22,000 crore will be completed in the coming three months, according to an official.
While the latest decision of formulating policies for exploitation of coal-bed methane (CBM) reserves and marginal fields is a new step, work on other areas like finalisation of a new revenue sharing contractual system was initiated by the previous government.
Also, to promote “Make in India” idea, government-owned GAIL floated a tender for charter hiring of liquefied natural gas (LNG) carriers with a mandatory condition of manufacturing at least a third of the total requirement in India. To boost international cooperation, the ministry has decided to construct a product pipeline connecting Raxaul in Bihar to Amlekhganj in Nepal.
The pipeline, to be set up by Indian Oil Corporation, would avoid movements through tank trucks.
In another new initiative, the ministry has given priority to CNG and PNG sectors, which impact the common man, for gas allocation. Under revised guidelines, GAIL has been directed to divert gas from non-priority areas to CNG and PNG sectors. To enhance infrastructure for gas supply, the government will lay additional 15,000-kilometre pipeline.
For ethanol blending programme, OMCs have also floated tenders for procurement of 155 crore litres of ethanol. Offers have already been received for 60 crore litres of ethanol, which would work out to 40 per cent of the requirement for five per cent blending. With focus on conservation, the government has also launched star-rating for liquefied petroleum gas stoves and diesel-driven moonset pumps for agricultural puposes in June. Star-rating for diesel-generating sets is likely to be launched next week.
Most experts praised the ministry’s efforts to revive investor interest in petroleum sector since May.
“I would say the government has performed well in the first 100 days in the oil and gas sector. It is concerned about the falling levels of domestic production and working on an agenda to reverse this trend,” Deloitte’s senior director Debasish Mishra told Business Standard.
“It is good the government did not get bogged down by the single issue of gas pricing, having set a time-frame of September 2014 to solve it,” he said.
Mishra added the government has not only come out with the draft model revenue-sharing contracts, asking for stakeholders’ consultation, it is initiating dialogues with industry to reform the existing production-sharing contracts, a policy on marginal fields, policy on matured fields and a policy on extension of existing contracts, too.
These efforts have come on the back of a reduction in OMCs under-recoveries from Rs 139,000 crore last financial year to Rs 95,000 crore expected in the current financial year.
The dip in oil marketing companies’ losses, however, is due to continued reduction in diesel under-recoveries owing to 50-paise-a-litre-a-month price hikes initiated by the earlier UPA regime.
