In 2012 Budget basic customs duty on Liquefied Natural Gas (LNG) and Natural Gas was fully exempted when imported for generation of electrical energy by a power generating company. However, the Power Ministry is not yet sure whether custom exemption benefits in importing gas is passed on to the gas based power generating companies or not. Unlike in case of imported coal based power companies where many a times power producer directly imports coal, in case of power plants based on regasified natural gas, the number of parties is many which makes tracking of actual claimant of the benefit difficult.
In India LNG is imported by Petronet LNG Limited (PLL) and Shell, Hazira and marketed by Shell hazira, PLL, IOCL, BPCL and GAIL. It should be noted that it is impossible for generating companies to consume the whole cargo for which duty exemption is provided and therefore marketing companies would provide gas if and when required by power companies. At the same time there is no mechanism to ensure that the benefits of custom exemptions are passed on to the generating companies. To tie up the loose ends in this regard, Ministry of Power has reportedly asked the CEA to collect data on regular basis about the quantum of gas used by power generating companies.