US advice on building a natural gas market in India

Vol 6, PW 4 (24 Apr 02) People & Policy

A HIGH-RANKING US energy official has issued a stark warning that reform of India's natural gas sector is impossible unless accompanied by reform of the power sector.

"A Key aspect of building a natural gas market is the health of the power sector," said Vickey Bailey, Assistant Secretary for Policy at the U.S Department of Energy, at a conference in Delhi last week.

"The electric power sector is the primary consumer of natural gas in India and is expected to be the driving force in your country's growing demand for gas." Ms Bailey was speaking at a conference on Building Natural Gas Markets in India hosted jointly by the Department of Energy and Indian Oil on 17th and 18th April. "Recent problems in the power sector have created serious concerns about the investment climate and the creditworthiness of potential consumers of natural gas," added Bailey.

"The key message here is that what happens in the power sector can affect investment prospects in the natural gas sector when electric utilities are the end user of the gas." Bailey, a former commissioner of the Federal Energy Regulatory Commission, said it is imperative that India's future regulator should be "experienced and have both the commitment and the proper resources to provide independent and equitable decisions." According to Bailey, India needs the following to ensure success in building a natural gas market: Independent and transparent regulator Market based competition and market based pricing Consistency in regulatory treatment rooted in law and fairly administered at both the centre and the state level Stable fiscal and legal framework And most important: sanctity of contract (not always the case in India: editor)