The Hindu Business Line : LNG pricing issue referred to Pant

THE Prime Minister, Mr Atal Bihari Vajpayee, has referred the issue of fixing the price for liquefied natural gas (LNG) imported by Petronet to the Deputy Chairman of the Planning Commission, Mr K.C. Pant. It is now left to Mr Pant to help the fertiliser manufacturers and Petronet reach a settlement on the pricing front.

The issue of fixing Petronet's imported LNG price has been hanging fire for quite some time now with the buyers and the seller unable to reach a mutual agreement on the pricing.

The bone of contention is the subsidy on the gas used by the fertiliser manufacturers, who are used to getting gas at a cost of $2.5 (about Rs 113.3) per MMBTU under the administrative pricing mechanism.

According to the stand taken by the Fertiliser Ministry, any price up to $3.5 (about Rs 136) per MMBTU would be considered for subsidy and the Department will reimburse them as fertiliser is an essential and sensitive commodity.

However, for any price beyond $3.5 per MMBTU, the cost has to be borne by the concerned manufacturer and the companies are not permitted to pass on the increased cost of input to the final consumers, that is, the farmers.

On the other hand, Petronet is not prepared to sell at any price lower than $ 4.5 (about Rs 204) per MMBTU.

Since the stalemate continued even after the first shipment arrived at Petronet's Dahej facility around the end of January, the Minister for Chemicals and Petrochemicals, Mr S.S. Dhindsa, approached the Prime Minister in the middle of February to intervene and sort out the issue. As the price has not been finalised as yet, the imported gas is lying unutilised at the Petronet's storage facilities.

According to sources in the Ministry of Chemicals and Fertilisers, the administrative Ministry for the Department of Fertilisers, the Prime Minister has referred the issue to the Deputy Chairman of Planning Commission who headed the Group of Ministers (GoM) on finalising the long-term urea policy. "We are closely monitoring the progress on a daily basis," Ministry officials said.

Petronet is a joint venture company in which four major public sector energy companies, namely, ONGC, IOC, GAIL and BPCL together hold a 12.5 per cent stake each. Ras Gas and Gaz de France hold another 15 per cent each and while the Gujarat Government holds a five per cent stake, financial institutions hold the rest.