The Hindu Business Line : Imported LNG price issue: Ball in PMO's court

THE issue of fixing the price for imported liquefied natural gas (LNG) has finally landed in the Prime Minister's court. The Ministry of Chemicals and Petrochemicals has sought the intervention of the Prime Minister's Office (PMO) to settle the matter.

The Minister for Chemicals and Petrochemicals, Mr S.S. Dhindsa, the administrative Minister for the Department of Fertilisers, called on the Prime Minister and sought his intervention to "sort out the issue".

According to Government sources, "the Prime Minister gave Mr Dhindsa a patient hearing and said that he will look into the matter."

Negotiations between Petronet LNG and the actual users of LNG, the fertiliser and power industry, on the price of imported LNG have reached a stalemate. All efforts by the Department of Fertiliser to broker a mutually agreeable price between the seller and buyers have failed, following which the Minister has taken the issue to the highest level, Government sources said.

Petronet LNG is a joint venture company in which four major public sector oil and gas companies — ONGC, IOC, GAIL (India) and BPCL - hold a stake of 12.5 per cent each. While Ras Gas and Gaz de France hold a 15 per cent stake each, the Gujarat Government holds five per cent and the remaining is held by financial institutions.

While Petronet LNG continues to insist on a selling price of $5.2 per million British thermal unit (BTU), the two main consumers, the fertiliser and power industry, are refusing to pay a price higher than $3.5 per million BTU.

"According to cost estimates done by the Department of Fertiliser, even at a price in the range of $3.0-3.5 per million BTU, the LNG import is perfectly commercially viable for Petronet," say officials.

Moreover, the power sector is also scouting for LNG internationally at $3 per MBTU or even less. The largest consumer in the power sector, NTPC, has already floated a global tender for supplies at around $3 per MBTU and other big companies such as Reliance and BSES are also planning to come out with global tenders, sources said.

The fertiliser department is optimistic of an early solution to the present deadlock as one official pointed out that "fertiliser is a very sensitive issue because it means farmers and farmers mean vote banks. We are monitoring the developments," officials said.

Meanwhile, the first shipment of LNG has already reached Indian shores and the ship will be unloaded only when the price issue is sorted out and contractual agreements between the buyers and the seller are in place.

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