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‘Major reforms in Natural Gas Marketing ’

  • Category
    Economy
  • Published
    13th Oct, 2020

The Government gave nod to major reforms in the marketing of Natural Gas in the country, taking another significant step to move towards gas based economy. 

Context

The Government gave nod to major reforms in the marketing of Natural Gas in the country, taking another significant step to move towards gas based economy. 

About

  • Natural gas is a fossil energy source that formed deep beneath the earth's surface. Natural gas contains many different compounds.
    • The largest component of natural gas is methane, a compound with one carbon atom and four hydrogen atoms (CH4).
    • Natural gas also contains smaller amounts of natural gas liquids(NGL, which are also hydrocarbon gas liquids), and nonhydrocarbon gases, such as carbon dioxide and water vapor.
  • Natural gas is used as a fuel and as a feedstock, with demand largely dependent on fertiliser industry (28%), power (23%), city gas distribution entities (16%), refinery (12%) and petrochemicals (8%) industries.
  • India currently produces 84 million standard cubic meters (MMSCM) of natural gas and imports around the same amount.
  • With the new reforms, 40 MMSCM will come into local production. Country’s dependency on import of natural gas will reduce.
  • The Ministry of Petroleum & Natural Gas is entrusted with the responsibility of exploration and production of oil and natural gas, their refining, distribution and marketing, import, export and conservation of petroleum products and Liquified Natural Gas.

Key-highlights of the Policy

  • Standard Procedure: The objective of the policy is to prescribe standard procedure to discover market price of gas to be sold in the market by gas producers, through a transparent and competitive process, permit Affiliates to participate in bidding process for sale of gas and allow marketing freedom to certain Field Development Plans (FDPs) where Production Sharing Contracts already provide pricing freedom.
  • Transparent Bidding Process: The policy aims to provide standard procedure for sale of natural gas in a transparent and competitive manner to discover market price by issuing guidelines for sale by contractor through e-bidding.
    • This will bring uniformity in the bidding process across the various contractual regimes and policies to avoid ambiguity and contribute towards ease of doing business.
    • The policy has also permitted Affiliate companies to participate in the bidding process in view of the open, transparent and electronic bidding.
    • This will facilitate and promote more competition in marketing of gas. However, rebidding will have to be done in case only affiliates participate, and there are no other bidders.
  • Freedom to FDPs: The policy will also grant marketing freedom to the Field Development Plans (FDPs) of those Blocks in which Production Sharing Contracts already provide pricing freedom.

Significance of the Reforms

These reforms will build on a series of transformative reforms rolled out by the Government in last several years. These reforms in gas sector will further deepen and spur the economic activities in the following areas:

  • Transparent system: The whole eco-system of policies relating to production, infrastructure and marketing of natural gas has been made more transparent with a focus on ease of doing business.
  • Encouraging investment in domestic production: These reforms will prove very significant for Atmanirbhar Bharat by encouraging investments in the domestic production of natural gas and reducing import dependence.
  • Increasing investment in downstream industries: The domestic production will further help in increasing investment in the downstream industries such as City Gas Distribution and related industries.
    • These reforms will prove to be another milestone in moving towards a gas based economy by encouraging investments.
  • Improvement in environment: The increased gas production consumption will help in improvement of environment.
  • Creating employment: These reforms will also help in creating employment opportunities in the gas consuming sectors including MSMEs.
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