Cabinet approves reforms in natural gas marketing

New Delhi (NVI): The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, has approved ‘Natural Gas Marketing Reforms’, taking another significant step to move towards gas based economy.

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, according to a statement by Cabinet Committee on Economic Affairs (CCEA).

Briefing the media after the meeting, Union Petroleum Minister Dharmendra Pradhan said that the Directorate General of Hydrocarbons (DGH) will suggest an e-bidding platform for users.

The move is expected to attract investors and help India’s push for a gas-based economy.

Pradhan said the decision will help increase domestic gas production by an additional 40 million standard cubic meters a day (mmscmd), from the current 80 mmscmd.

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 statement added.

Further, post the latest decision, the producing company cannot participate in the bidding process, while affiliate companies can participate in the bidding process.

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.

It will also grant marketing freedom to the Field Development Plans (FDPs) of those Blocks in which Production Sharing Contracts already provide pricing freedom.

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. These reforms will also help in creating employment opportunities in the gas-consuming sectors including MSMEs, CCEA added.

The domestic production will further help in increasing investment in the downstream industries such as City Gas Distribution and related industries.

“The Open Acreage Licensing Policy (OALP) which is investor driven acreage auction process, has increased substantial acreages in the country. No blocks were allocated between 2010 and 2017 which has impacted the long term viability of the domestic production. Since 2017 more than 1.6 lakh area under 105 exploration blocks have been allocated,” the statement added.