The Telegraph
Friday , July 18 , 2014
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New gas allocation policy in the works

New Delhi, July 17: The Narendra Modi-government’s committee of secretaries (CoS) is considering a new gas allocation policy.

The new policy, which is likely to take effect along with revised gas prices in September, may give priority to public transport, households and heavy water plants. Urea and power plants will be placed in the next category, while gas rich in ethane, propane and butane will be allocated to petrochemical industries, according to a note for the secretaries prepared by the oil ministry.

“Since there is going to be a uniform price for domestic gas, it is necessary to have a uniform allocation policy as well,” the note said.

Officials said the government was working simultaneously to settle the pricing problem. Based on the Rangarajan formula, prices were expected to double from $4.2 per million British thermal unit (mBtu). Other formulas, which include keeping out spot prices, incorporating shale gas prices in the US and determining the rate in rupees instead of dollars, are also being considered.

However, the prioritisation is being challenged by the ministries that look after the interest of urea and power plants and the issue is likely to go the cabinet and the Prime Minister’s Office.

Till now, gas supplies to transport (CNG) and domestic (PNG) sectors had a relatively lower priority. This was challenged in the Gujarat high court, which ordered that natural gas should be allotted for domestic and motor vehicles in Ahmedabad at rates similar to Delhi and Mumbai to enforce the right of equality. The Supreme Court has also upheld this order.

The government is now obliged to follow the apex court’s direction to meet piped gas supply and CNG needs of the people.

Officials said it was felt that heavy water plants, whose output was used as a “moderator” and “coolant” in nuclear power and research reactors, needed to get priority.