The government is contemplating granting infrastructure status to the liquefied natural gas (LNG) sector. A decision on this will be taken once a regulatory mechanism for the sector is in place.
Infrastructure status for the LNG sector, proposed by the industry ministry, is mainly aimed at facilitating priority funding by financial institutions for projects proposed in this sector.
The petroleum ministry, which has been asked by the Committee of Secretaries (CoS) to set up the regulatory mechanism for the LNG sector, also favours granting infrastructure status.
The infrastructure status will also enable projects coming in this sector to avail of tax exemptions for a specified time period.
The petroleum ministry has already initiated the process of setting up the regulatory mechanism for the LNG sector and circulated a draft proposal on this to all the ministries concerned.
According to the proposal, the regulatory authority will mainly deal with issues related to pricing and sharing of common pipeline facilities for the distribution of LNG.
The proposal for granting infrastructure status to the LNG sector is singificant as financial institutions were somewhat reluctant to fund the half a dozen projects that have already been approved by the Foreign Investment Promotion Board (FIPB).
Though there are as many as seven projects which have got FIPB nod for setting up projects in the LNG sector for undertaking various activities, including construction of terminals and pipelines and import and regassification of LNG, only the proposal by Petronet, the joint venture by the three public sector oil majors, is seriously making some efforts to implement the project.
The FIs' reluctance to fund the projects in this sector is understood be the major reason that is holding up the other projects in this sector.
