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The ministry of petroleum and natural gas proposes to come up with a common policy for priority allocation for utilisation of natural gas procured across sources like administered pricing mechanism (APM), non APM and New Exploration Licensing policy (NELP-X).
The policy to be worked out will have two major objective– to maintain the current priority of allocation first. Secondly, the priority allocation will be to only to those sectors where either there is an element of government subsidy involved or end use pricing of the product which uses natural gas is regulated. Subsidised natural gas will be given only to those sectors, said sources
Officials explained that ultimately the common policy for distribution will see to it that the benefit of priority allocation is given to either common users or government. The government should get the benefit so as to set off subsidy given to the sector. Explaining this, an official said, currently, fertiliser is a priority sector which receives subsidy from the government which gets netted off to the extent these companies especially urea receives domestic natural gas under priority allocation.
Similarly, liquefied petroleum gas (LPG) and compressed natural gas (CNG) users get priority allocation and the ultimate beneficiary is common users.
The allocation criteria for distribution of natural gas currently runs in descending order in priority in sectors like fertiliser, LPG, power etc.
However there is no fixed policy for priority allocation for natural gas. Sources explained that in 2005, when administered pricing mechanism started to work when natural gas price was regulated , there was no policy for sectoral allocation. All users put up their demand to a Gas linkage committee which decided the allocation of the natural gas so pooled. Under Administered Price Mechanism (APM), all the gas produced from blocks given to OIL and ONGC was priced at government-controlled rates,
However during the non APM regime, the government made a distinction between existing producing fields and new ones in the nomination blocks and ONGC and OIL were given the freedom to sell any production from new fields in their nominated blocks at non-APM rates. Any additional natural gas produced from blocks given to ONGC and OIL on nomination basis would fall under the free pricing policy that is non APM. However the sectoral allocation of this natural gas was prioritized which continues till date. Now NELP X production will come. Therefore across source and category of production, there has to be a common policy for allocation of natural gas as it is in short supply. Moreover, huge government investment is involved in enhancing production .
Earlier last year, the petroleum and natural gas ministry had recommended allocation of APM priced natural gas to both fertiliser and power sectors. Later the priority was only restored back to fertilizer sector.
Officials explained further, out of the total available stock of natural gas in India , 50% is priced as per APM and rest is proposed to be priced as per the general pool. The gas pooling is a notional pool where price of domestic gas and imported gas will be averaged out
Last year the press note on APM price revision for natural gas stated that it would impact the cost of power only marginally while the selling price of fertilisers is likely to be unaffected. The revision in APM price would encourage further investment in exploration and production, thus enhancing gas availability and ensuring energy security.
Currently, the fertiliser and power sectors get 29.4 and 17.5 million metric standard cubic meter per day of gas, respectively.
