The Federation of Indian Chambers of Commerce and Industry has welcomed the policy initiative taken by the government to revise the domestic natural gas price from the present $ 4.2 mmbtu to $ 8.4 mmbtu starting April 1st, 2014, to be reviewed on a quarterly basis.
FICCI has been in favour of offering remunerative prices to domestic producers on the ground that an efficient pricing mechanism would play a key role in expanding domestic energy supply. The representative body of the corporate sector is also of the opinion that correct pricing of energy leads to more efficient use of energy resources.
“The revision in natural gas price will bring in the much required technology and risk capital from foreign majors to tap vast unexplored resources in the deep and ultra deep water frontier basins. This also has the potential to usher in the much needed gas revolution in India with an increased share in our energy basket in line with that of developing countries,” said Naina Lal Kidwai, President of FICCI.
According to FICCI, though many feel the increase in gas prices would lead to a hike in power tariffs and increase in fertilizer cost, it was important to understand that given the current state of domestic production, huge dependence on imported LNG was an expensive proposition.
LNG is imported at $ 13-14 mmbtu and sold domestically at the current rate of $ 4.2 mmbtu.
The apex business organisation is of the view that lower domestic natural prices encourage Indian companies to invest in overseas E&P activities and develop their economies, create employment overseas, and then import LNG to India at market-determined prices resulting in not only depletion of foreign exchange reserves but loss of royalties, production linked payment and taxes for the government as well. In addition, the incentive and financial ability to develop local and regional gas transportation and distribution infrastructure gets reduced.
FICCI expects the revision in domestic natural gas prices to benefit the country in a number of ways. Besides boosting domestic gas production and reducing dependency on expensive and polluting fuels such as diesel and naptha, it would lead to coal sector reforms because of competitive pressures and increased availability of natural gas, revival of gas-based power projects and setting up of new gas-based power projects. Also, with domestic sources of energy bringing down the oil import bill, there is going to be a significant reduction in the country’s current account deficit.