Forget any thought of a free gas market in India

Vol 13, PW 8 (24 Sep 09) People & Policy

Any hope that India might one day enjoy a free market in the sale and supply of gas have been dashed, as the government continues to dictate terms to producers, both private and state-owned.

First it was Mukesh Ambani owned Reliance that was asked to toe the government line when in May last year it surrendered marketing and pricing rights for D6 gas, even though NELP contracts give it these rights, in theory. Now state-owned ONGC is being told to surrender the same rights for gas produced after 2004, when the subsidy regime should have ended, in theory.

Under scrutiny is ONGC’s right to sell gas at market prices from the offshore C-Series marginal fields, and other fields that will come into production after November 2004, when the government disbanded the Gas Linkage Committee (GLC), theoretically freeing the gas market from bureaucratic control. In July, we reported how the government ordered ONGC to abort plans to sell up to 3m cm/d C-Series gas to GAIL beginning August 10 at the Uran landfall price of $5.5/mmbtu.

No further word has come from the ministry, leaving ONGC and GAIL anxiously awaiting the go ahead. Contacted by this report, an oil ministry source offers a bland explanation: “We are examining to whom C-Series gas should be sold and at what price.

â€‌ Pressed further, he added: “Our view is that this has to be determined by government policy.â€‌ Our source also made the astounding comment that: “If we can do this (determine customers and price) for NELP contracts (read: Reliance) there’s no reason why we can’t do the same for state-owned companies (read: ONGC).

â€‌ Isn’t that a retrograde move Don’t NELP contracts allow marketing and pricing freedom to operators Aren’t fields like C-Series outside the subsidy regime “Perhaps,â€‌ replies a non-committal bureaucrat. “But we believe gas should be allocated first to priority sectors and haven’t yet come to a decision about C-Series gas.