India to change protectionist LNG shipping policy

Vol 9, PW 6 (30 Jun 05) People & Policy

Good news for Shell and other LNG marketing companies constrained by Indias protectionist LNG shipping policy.

On 16th June, a meeting chaired in Delhi by Prime Minister Manmohan Singh decided to take a critical look at the countrys LNG shipping policy, which has been under sharp attack, particularly from Shell. The meeting decided that the LNG shipping policy needs a critical look, a source present tells us.

It was felt that the policy is restrictive and needs to be re-examined. We learn the commerce ministry has been charged with taking this critical look at the LNG shipping policy and has been asked to prepare a paper on the subject.

Mounting concern over the price and availability of LNG for the power sector prompted the 16th June meeting in the PMs office, attended by: finance minister Palaniappan Chidambaram, oil minister Mani Shankar Aiyar, power minister PM Sayeed, commerce minister Kamal Nath, shipping minister TR Baalu and Planning Commission deputy chairman Montek Singh Ahluwalia. A participant at the meeting tells this report: The PM listened to every one.

He is a good listener. Among other things, the meeting also agreed that, the need of LNG is increasing in India and (so) should be bought at the most competitive rate.

One of the hurdles in the path of competitively priced LNG entering the domestic market was clearly identified as the LNG shipping policy. Shell has been lobbying the oil and shipping ministries against a Shipping Development Circular issued in July 2004 by the Director General of Shipping, which makes it mandatory for all long-term FOB LNG imports to carry an Indian flag.

It also makes it mandatory for an Indian company to hold 26% of any LNG shipping venture to India.