The Hindu Business Line : AP seeks market regulator for domestic gas produce

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AP seeks market regulator for domestic gas produce

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Move for market pricing mechanism opposed

Hyderabad , July 18

Concerned over the possibility of market-driven pricing for natural gas supplies, the Chief Minister, Dr Y.S. Rajasekhara Reddy, has written to the Prime Minister, Dr Manmohan Singh, to consider issues relating to gas, as this has significant impact on independent power producers and thereby on the consumers as well.

In the letter, Dr Reddy said that any increase in gas price would have substantial implications on price of power in Andhra Pradesh and potentially result in an unjustified increase in power sector tariffs.

Such an increase will not only bring power sector reforms into disrepute but also adversely impact the overall economy of the country.

He urged the Centre to intervene immediately to ensure that a market regulator is established by statute to cover upstream gas pricing.

This move is in response to a recent stand taken by the Ministry of Petroleum and Natural Gas that upstream gas prices would be tied to the market.

If the reference to market is to the international market, it would be unacceptable as gas exploration and production are indigenous efforts, Dr Reddy said.

He maintained that in view of the shortage of gas and limited players, cost-plus pricing by an independent regulator, established by a statute, was essential as long as the shortages continue and as long as production is in the hands of a few monopoly producers.

Once there are enough players and the supply-demand balance improves within the country, the market can be allowed to operate.

Referring to countries with gas reserves, Dr Reddy said that the price of natural gas produced for the domestic market should not be linked to international fuel oil prices.

The issue relating to price to the market in the gas sector, where there is a significant shortage of supply and a monopoly producer and distributor, was highlighted.

Independent power producers have been adversely affected due to inadequate gas supplies, he said.

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