(1888PressRelease)
May 03, 2007 - Recently in the capital, the Observer Research Foundation organized an International Conference on India’s Expending Gas market. The conference was held in New Delhi on April 16, 2007. The conference was attended by the dignitary like Mr. Montek Singh Ahluwalia, Mr. Pranav Mukherjee and other bigwig public figures besides luminary industrialists.
According to Mr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, Government of India, it is quite clear that our ratio of gas to total energy is much lower than the average on the rest of the world and even lower than what is the case in developed countries therefore we should assume that with a bit of luck we can do much better in gas.
Mr. Ahluwalia said that it is also clear that serious exploration of gas possibilities is much less than what it should be but the solution is not that we put lots of public sector money into it. We should just let companies explore and the NELP provides the framework that enables that kind of exploration to take place. Some of the presentation seems to suggest that private companies are good at managing resources and extracting them at lowest cost. He said that that’s consistent with the general policy that we are following in most of these areas and certainly to the extent to which there are public sector companies which have the resources want to invest in finding gas they are welcome to do so but private sector companies wanting to do the same thing should be able to do it on a competitive basis that is what the present policy is and I think that present policy should continue.
On gas pricing he said that one of the key issues really is pricing of gas. Our own experience historically with the Administered Price Mechanism is that it created an expectation somehow that gas would be available at relatively low prices and for a period that led to a lot of power capacity being set up based on rather loose assurances of availability of supply which were not actually legally enforceable but they belong to the world in which people regarded odd letters and odd assurances as good enough reasons to invest. But he thinks the investors in power plants have learnt their lesson and as per his understanding at the moment there is very little investment being planned for gas use in power simply because the present gas price is so high. He means in that sense gas for power has to be its opportunity cost is really going to be determined by the price of coal.
According to him one important issue in all this is the premium you place on it being clean fuel and that is very much connected with what is going on in the world about global warming. One stream of the global warming debate obviously is how the framework convention on climate change will unroll and what it would do in terms of incentivizing people to move away from coal. Another is simply that irrespective of what happens there what happens to national standards and guidelines and environmental norms all of which will certainly raise the cost of producing power from coal. So I think the premium that gas would enjoy as a cleaner fuel than coal is something, which over a 20 years horizon one way or the other is going to get factored into the price.
The Regulatory Board has already approved the idea of Regulator that would very soon have the personnel in lace like in other regulatory bodies. It would take a certain amount of time before the regulator is fully in place and before a cultural regulation has emerged and that will evolve and there will be many difficulties on the way and the only thing one can say is we should be benchmarking against established international practice and not re-inventing the wheel and that’s what will be done in this area.
He further adds that the recent private sector gas finds hold out the prospect that in the medium term for a certain period any way we have a prospect of a considerable easing of the availability of gas which will take a bit of time to become felt in the market. But that period will allow us to experiment with a system where a very substantial volume of the gas will not be under the APM method and I think that experience will get people used to what’s happening.
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