Gas pooling panel bias against private sector

Vol 14, PW 19 (24 Mar 11) People & Policy

Believe conspiracy theorists and a ‘powerful LNG lobby’ is at work in India to try to impose a 'pooling' system that would average the price of expensive LNG with cheap domestic gas.

How else to explain the announcement of an ‘inter-ministerial’ panel on gas price pooling, announced on March 9 This panel includes state-owned companies GAIL, ONGC and Petronet-LNG, as well as government officials from the oil, fertiliser, power and finance ministries. But strangely, it excludes private sector gas producers like Reliance, Niko, Cairn and BG or major LNG importers like Shell and Total.

An outraged industry source believes it’s a clear “conflict of interest” for the government to include its favourite LNG importers, GAIL and Petronet-LNG on the panel, chaired by Planning Commission member Dr. Saumitra Chaudhuri.

He sees this move as yet another attempt by the government to interfere in gas pricing, reminding us that Petronet-LNG may be a private company in theory, but is a government company in practice, with the oil secretary as its chairman. Another critic points to the panel’s ‘terms of reference’ as further evidence that the government has decided to go ahead with gas price pooling.

“Why is the government imposing price pooling on us” asks a gas sector source. “LNG importers will no longer have any incentive to source the cheapest LNG.

Inefficient pricing will result.” He wonders whether anyone has bothered to secure permission from the cabinet panel already in existence to determine the NELP gas price before setting up this new gas price pooling panel.

If LNG imports are needed to supplement domestic gas, we hear, then any price pooling should take place without government interference. “Give LNG importers the freedom to pool their own gas prices,” says our source.

“This will promote efficiency.”

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