Government is crippling gas sector: Mansingh

Vol 13, PW 19 (11 Mar 10) People & Policy

Gas regulator Labanyendu Mansingh has clearly been provoked by January’s order from the Delhi High Court stripping him of the power to issue retail licences for towns and cities.

At a conference at the Pandit Deendayal Petroleum University in Gandhinagar on March 4, Mansingh lashed out at the Indian government’s repeated interference in the oil and gas sector and in the process firmly established his free-market credentials. Academics and students heard Mansingh paint a grim picture of India’s gas industry, which he said was being “chokedâ€‌ by government bureaucracy.

“The government is everywhere!â€‌ said Mansingh. “It fixes prices for oil and gas and it allocates supplies.

The obvious fallout is that open market trading of oil and gas cannot take place. In the US customers can pick and choose from more than 2000 gas suppliers and nearly 60% of the gas consumed is spot gas.

But in India the dependence on government continues – you are lucky if you get a gas allocation.â€‌ Mansingh further lamented the absence of fair play in India’s oil and gas industry because of government subsidies to state-owned companies.

“Households expect to receive piped natural gas around 20% cheaper than the already heavily subsidised LPG cylinders!â€‌ he said. Mansingh also blamed government for the poor response to NELP-VIII.

“The poor response to NELP-VIII,â€‌ he added, “should clearly indicate to the government that if it wants to attract big international players it should leave the process of determining prices to market forces.â€‌ Finally, Mansingh listed some positive changes that would happen if the government stopped trying to micro-manage the gas industry.

“India’s gas industry will become a magnet drawing huge investments in exploration, production, transportation and distribution,â€‌ he said. “This is important because the country’s natural gas infrastructure needs investments of between $16bn and $25bn if it is to grow.

â€‌ A free and competitive gas market, he said, would lead to better â€کprice discovery’ and the best use of energy resources.