Gas produced under the New Exploration Licensing Policy (NELP) is governed by the provisions of Production Sharing Contracts (PSCs) according to which the contractor has the freedom to market gas produced from his area of operation, to any part of India at market related price. This means that gas may not be consumed at the point of production but transported to other areas.
Many a time this had become a political issue with local leaders campaigning against transportation of gas to other areas rather than being used for the development of the area where it was produced. Even the standing committee on petroleum and natural gas has suggested that government should consider the feasibility of making a provision in the PSCs for future rounds of NELP to ensure that a certain percentage of gas is earmarked for the area from which it is produced.
Exploration is a highly risky and capital intensive business. Government opened up the sector for private and foreign investment considering the huge investment required in the field. In NELP terms, there is no investment from the government side, but it shares profit as per the bidding conditions, in case of commercial discovery. NELP has been designed to attract the investors for exploration as per the practices followed internationally. In exploration inputs are determinate, but the outcome of the efforts is uncertain. Considering the nature of exploration business and availability of infrastructure available in the country, it was decided to have freedom for the operator to sell the produced gas in the domestic market driven price.
Any further restriction in NELP terms may be deterrent to the investment in the states. Further, it should be noted that the offshore areas come under the purview of the Central government. Putting conditions to restrict gas selling by the operators in the state only, may switch the investment from on land areas to offshore areas. Therefore, it is in the interest of both states and the Centre to provide freedom to sell gas at market driven prices only.
Protests were raised even in case of other minerals like iron ore and coal. Governments of Orissa, Jharkhand and Chhattisgarh are vehemently opposing their mineral resources being exported to other states. Incidentally these are some of the least developed states. Though blessed with rich natural resources these states are lagging far behind other states like Gujarat and Maharashtra in terms of growth. Indeed, the main reason for their protests is the regional imbalance in growth.
The government should give sincere thought to mitigate regional imbalance in growth. Otherwise such protests may become frequent and uncontrollable.

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