The petroleum and natural gas ministry has begun interministerial consultations on its proposal to end the power sector’s priority access to cheap domestic gas, setting up a gas trading platform and hiving off GAIL’s pipeline business into a subsidiary. It will send the proposals to the Cabinet after the consultation process, which is expected to take a few weeks, said officials.
The ministry has proposed to permit use of cheaper domestic gas by just fertilizer makers, city gas distributors and liquefied petroleum gas (LPG) makers, they said. Power plants and other industries are proposed to be barred from accessing cheap local gas, most of which is priced as per a government-set formula and is cheaper than the imported liquefied natural gas (LNG). The proposal will not initially apply to gas from isolated fields that can’t reach the national pipeline grid.
The aim is to free up some local gas that can then be traded on a proposed trading hub, helping discover market rates for the output, said officials. The power sector and other consumers can buy local gas at market rates. The power sector, the biggest consumer of local gas, is expected to fiercely oppose the proposal that would increase its input cost.