The Hindu Business Line : Only tax cuts can help reduce LNG price: Petroleum Secy

VOICING the demand of the power sector, the Power Secretary, Mr R.V. Shahi, today said at a conference organised by the Confederation of India Industry (CII) that Regassified Liquefied Natural Gas (R-LNG) should be made available at no more than $3 per million British thermal units (mbtu). Petronet LNG Ltd (PLL), the only R-LNG supplier in the country, offers LNG at over $4.4 per mbtu.

Dwelling on the same subject, the Petroleum Secretary and Chairman PLL, Mr B.K. Chaturvedi, said that tax cuts alone can reduce the price of LNG

According to Mr Chaturvedi, 0.53 cents to $1.07 per mbtu could be cut from the LNG price if customs duty and sales tax on LNG is waived and transportation cost cut.

Fuel cost is extremely sensitive to tariff since it comprises around 50 per cent of the power generation cost. According to Mr B.P. Singh, General Manager, National Thermal Power Corporation (NTPC), there is little difference between the fixed cost of a gas-based power plant and that on a competing fuel, coal.

Fixed costs mainly comprises of the return on equity on the capital cost of the plant, debt repayment and depreciation. "The difference between the fixed cost of the coal plant vis-à-vis the gas-based plant on a levelised basis (taking into account the life cycle of the plant) is around 4 paise per unit. Hence, LNG needs to be priced in the $3 per mbtu region in order to compete with coal," he said.

On the price reduction measures, Mr Chaturvedi said that his prescription included abolishing of 5 per cent customs duty on LNG ($0.14 per mmbtu gain); abolishing of state sales tax or notification of natural gas/R-LNG as `declared goods' under Central Sales Tax Act, thereby attracting a maximum of 4 per cent tax ($0.79 per mmbtu gain in Gujarat and $0.25 per mmbtu outside Gujarat); waiver of purchase tax of 4 per cent for transfer of gas outside Gujarat ($0.14 per mmbtu).

Mr Chaturvedi argued for a reduction in the cost of transportation of regassified LNG. Currently, GAIL (India) Ltd charges $0.31 per mmbtu for transporting LNG in Gujarat and $0.405 per mbtu outside Gujarat. In contrast, the shipping cost of LNG from Qatar to India is only $0.26 per mbtu.