From pricing to allocation, natural gas is one sector that is always into controversies — and L Mansingh knows it well. The chairman of the Petroleum and Natural Gas Regulatory Board, in an interview with Shine Jacob, shares his views regarding the potential, controversies and pricing of the fuel. Edited excerpts:
How far are the pipeline, LNG terminals and CGD (city gas distribution) projects on track?
Two-and-a-half years ago, nobody would have believed that an LNG terminal is going to come up. Now, if some player is planning it, is because, we have been pushing for more competition. If the regulator had acted conservatively, with only three or four big groups and public sector undertakings, the sector would not have grown. The Ludhiana CGD bidding is an example, we have got 16 bids, most of whom were newcomers.
It is like a chicken-and-egg situation in gas business. Neither LNG terminal, nor pipeline can come up, if the other one is not there. So, it is like what comes first — the chicken or the egg. We can take a part of the credit for development in the sector as we have been pushing for more infrastructure development.
Moves like the CGD networks are creating an expansion of gas market, because of that the pipelines and LNG terminals are coming up. It’s also because the gap between demand and supply of gas in the country is increasing, not decreasing. Even some LNG terminals are already in expansion mode, like Petronet in Dahej and Kochi.
Recently, there were a lot of controversies regarding the Reliance pipeline from Kakinada to Haldia and GAIL pipeline from Jagadishpur (in Howrah district) to Haldia (50 km southwest of Kolkata). What exactly is the status of the projects?
The government had given the authorisation for these two pipelines in 2007. It said that it shall be implemented with in 36 months of the first RoU (right of use) notification that happened in 2009. So, the 36 months have already started for these projects — and will end next year. Since, they have not started the project, we have issued a notice.
We brought it to the notice of the ministry that these two pipelines are important for the nation and both parties are not implementing it — neither GAIL, nor Reliance. I believe, the ministry had called both parties separately.
GAIL said they cannot come up with the pipeline, until the gas is available or the Reliance pipeline comes up. But as the ministry is responsible for gas allocation, Reliance has said that you allocate gas, we will put the pipeline. They have a valid question, if the ministry is not telling how much they will allocate, how can they put the pipeline? Their problem is this: how can they invest Rs 1,00,000 or Rs 12,000 crore for a pipeline, if there is no gas?
Do you think both the parties will get an extension of this deadline or can revive RoU notification?
For an extension, they have to apply separately. We said either you implement it or you formally apply for extension of deadline. As the authorisation was issued by the government, there is one question on whether the board can extend the deadline or cancel that authorisation, or will it be the government who is going to decide. This issue needs to be addressed.
Your take on the debate regarding the pricing of gas?
A government committee had introduced the concept of pooled pricing in gas — linking the high price gas with the low price — so that it will be an average price. We strongly opposed the move, saying that apart from violating the provisions of the PNGRB Act and the Competition Act, it will distort the market. We said the move would kill the LNG terminals that were to come up.
So finally, the committee recommended against it. What they are saying is that, as per government priority, gas should go first to fertiliser and then to power, after that you have to buy gas for spot price. They are saying pooling can be done for allocation.
In my view, there is no reason why power should be indirectly subsidised in this manner. In the case of fertilisers too, there is a question of whether it should be direct or indirect. Subsidising is not in the purview of the board, it is a political decision. Our mandate, as per the Act, is that we will not allow that manner of subsidisation to distort the market.
Take the case of D6 gas, out of the profit, Reliance has got only 15 per cent share while the rest goes to the government. They are actually the owners, so by fixing a lower price, you are actually cutting your teeth. If they are allowed to sell at market rate, it would be around $6.5. Who will gain from this? The government. The amount from it would be so huge that you can subsidise a small portion of it.
