The Hindu Business Line : LNG pricing issue to be referred to tariff panel

(From left) The Minister for Chemicals and Fertilisers, Mr Ram Vilas Paswan, the Minister for Power, Mr P.M. Sayeed, the Finance Minister, Mr P. Chidambaram, and the Minister for Petroleum and Natural Gas, Mr Mani Shankar Aiyar, at the Inter-Ministerial Group meeting on supply and pricing of LNG in the Capital on Wednesday. — Kamal Narang

New Delhi , July 21

THE Inter-Ministerial Group on liquefied natural gas (LNG) pricing headed by the Finance Minister, Mr P. Chidambaram, in its first meeting held here on Wednesday, decided to refer the issue of pricing of imported LNG to the Tariff Commission.

The IMG also decided that the Ministry of Petroleum and the Ministry of Power will try to identify other sources for gas for better price discovery.

Briefing reporters after the meeting, Mr Chidambaram said that "the Minister of Power and Petroleum have been asked to make attempts to identify alternative sources of natural gas in order to make better price discovery."

Regarding the pricing of LNG imported by Petronet LNG for the fertiliser sector, the Finance Minister said that "the question relating to the post c.i.f. cost (of LNG imported by Petronet LNG) has been referred to the Tariff Commission."

The two Ministries have been asked to report back to the IMG within the next 15 days about their respective progresses about finding alternative sources for fuel gas. After that, the Tariff Commission would be expected to come up with its recommendations within the next one month.

The meeting was attended by the Fertiliser Minister, Mr Ram Vilas Paswan, the Petroleum Minister, Mr Mani Shankar Aiyar, the Power Minister, Mr P.M. Sayeed, and the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia.

The issue of fixing the price of gas for the fertiliser industry had been hanging fire for several months now. The earlier NDA Government had several rounds of high-level discussions on this issue. The erstwhile Fertiliser Minister had taken up the issue several times with the former Prime Minister, Mr Atal Bihari Vajpayee, who repeatedly referred the matter back to the erstwhile Planning Commission Deputy Chairman, Mr K.C. Pant.

The present Fertiliser Minister, Mr Ram Vilas Paswan, told reporters after the meeting that "the issue involves around Rs 6,000 crore which the Government has to take care of. So there will have to be a solution.

The Union Petroleum Minister, Mr Mani Shankar Aiyar, told reporters that efforts will me made to see that the issue does not remain hanging with the Tariff Commission for too long.

Petronet, which imports the gas from the Iran-based Ras Gas, had been demanding $5.2 per MMBTU for Gujarat and at $4.8 per MMBTU for other States.

The bone of contention is the subsidy on the gas used by the fertiliser manufacturers who are used to get gas at less than $3 per MMBTU under the administrative price mechanism.

According to the stand taken by the Fertiliser Ministry, any price up to 3.5 per MMBTU would be considered for subsidy and the department will reimburse them as fertiliser is an essential and sensitive commodity but beyond $3.5 per MMBTU, the cost has to be borne by the manufacturer concerned and the companies are not permitted to pass on the increased cost of input to the final consumers, i.e. the farmers.

On the other hand, Petronet is not prepared to reduce its offer price.

Simultaneously the fertiliser manufacturers have made it clear that it would not be possible for them to absorb the increased cost. Adding to the complication is that fact that the availability of gas in the country is expected to reduce over the next few years as the new found reserves will take several years to develop.