Protests against 'uniform gas pricing' report

Vol 13, PW 22 (22 Apr 10) People & Policy

Expect a barrage of protests from private gas players against a report submitted by Spanish consultant Mercados Energy Markets, which recommends two separate ‘uniform gas pricing’ regimes for India’s fertiliser and power sectors.

Private players accuse Mercados of consulting only GAIL and the oil ministry and failing to invite suggestions from gas producers such as Reliance, ONGC, Cairn, Niko and BG; or from any of the key fertiliser and power sector consumers. “Mercados seems to have been given a mandate by GAIL and the oil ministry to justify ‘pooling’ (averaging prices),” says one private gas producer.

“They’ve done just that, without seriously looking into its merits and demerits. Such a regime assumes the government will always have control over gas, and this has serious implications for private players like us.

” Another private player says uniform gas pricing across entire sectors, as recommended by the Mercados report, has never been done before. “Mercados has not provided a single example of this kind of pooling anywhere in the world,” he adds.

Some European gas suppliers do conduct a form of pooling by averaging prices from multiple gas sources, but this model is already followed in India by gas suppliers Petronet-LNG and producers like ONGC, Reliance and Cairn India, we hear. “Mercados admits pricing systems in the US, UK, and European gas markets cannot be replicated in India,” we hear, “as the level of development here is different.

” Yet another private gas player adds the Mercados report is biased towards LNG suppliers, and pushes for more LNG sales in India by pooling LNG prices with relatively cheap domestic gas prices. When contacted, a senior oil ministry source describes the Mercados report as, “only a concept paper” about which it is too early to comment.

“We will first discuss it with various ministries,” he says, “and we will also consider the views of a wide cross-section of stake holders.”