The government has decided against giving the power sector priority access to cheaper domestic gas. The petroleum ministry is finalising a note for the Cabinet on gas sector reforms which among other things proposes to restrict allocation of limited domestic gas for fertiliser, city gas distribution (CGD) and production of LPG.
Sources said that the oil ministry note has also proposed setting up gas exchange platform in the country while ending conflict of interest in the operations of gas utility GAIL by separation of its pipeline operations into a separate independent subsidiary.
“A lot is at stake for the country’s energy sector as we move towards developing a gas economy. There is a need to clearly identify the priority areas for allocation of domestic gas that remains in short supply while allowing other sectors to actively shift to market-based mechanism of sourcing the green fuel,” said a government official not willing to be named.
The proposal to end power sector’s access to cheaper domestic gas stems from the fact that local fuel remains insufficient to meet the need of even the existing capacity and power producers necessarily have to import LNG to meet their requirements. In such a scenario, it is felt that power sector could meet its needs through market participation and imports and if that means increasing the power tariff, so be it.
Also, if the state governments want to subsidise power tariff, that could be done through a transfer subsidy transfer mechanism directly to consumers.