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Home News Power Sector News Ashok Chawla committee against subsidised gas for power companies

Ashok Chawla committee against subsidised gas for power companies

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Ashok ChawlaIn a reversal of the current government practice of pricing controls on gas, a high-powered committee is considering recommending market pricing for natural gas instead of artificially keeping price low for the benefit of fertiliser and power sectors. The committee headed by former finance secretary Ashok Chawla on allocation of natural resources is of the view that the argument for subsidising gas for power and fertilizer was weak. In the case of power, gas-based power plants could be used for providing non-base load power.

"In the short term, gas does not offer any significant cost advantages for base load power generation compared to coal," said the draft recommendations of the committee. Besides, power could be priced according to the demand since the Central Electricity Regulatory Commission (CERC) allowed time-of-the-day tariff. The committee is also in favour of using gas as a substitute for oil rather than coal.

In the case of fertilizer, the basis for subsidising cost no more holds ground since the government was moving to consumer based subsidy. Power and fertilizer currently consume nearly 75 per cent of the total gas available in the country though there is no distinction in pricing for any sectors. In fact, the ministry of petroleum and natural gas has, in its recent directions to the Reliance Industries Ltd, said the supply to fertilizer, LPG power and city gas distribution should be given priority over other sectors.

The committee, that would be submitting its report to a group of ministers on corruption, is also not in favour of gas pooling arrangement though it was considering a proposal whereby contractually committed sellers can sell gas to a government agency at an agreed price. The agency could then resell gas to allocated consumers at a market price.

On the issue of auctioning of oil and gas blocks, the committee favoured monitoring post-award obligations more closely, especially with reference to investment audits and exploration commitment audits. Besides, it felt that renegotiating contractual commitments post contract decreases investor confidence.

While support moving to an open acreage policy, the committee noted there should be clarity in the role of Director General of Hydrocarbon, the upstream regulator, especially with regard to its relationship with the ministry of petroleum and natural gas.

In a recent meeting, the committee noted with concern the limited legislative oversight and varied level of influence on government policies.

Source- Business standard

 

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