Gujarat won’t oblige Centre in subsidising LNG for Dabhol

AHMEDABAD: The Gujarat government and its public sector units would take legal recourse if the Centre enforces an over 50% hike in gas prices for existing consumers of regassified LNG from Petronet LNG in Gujarat.

The Congress-led government at the Centre is forcing gas consumers in Gujarat to cough up an additional Rs 750 crore per year so as to bring down the cost of the Dabhol power project in the Congress-ruled state of Maharashtra.

If Gail, IOC and BPCL persist with their demand for raising the prices of RLNG, then consumers such as GSPC, GEB, GSFC and GNFC would take the matter to court as there is no provision in their long-term contracts for a price revision before December 31, 2008. “The price increase of over 50% is steep and against contractual provisions.

In 2004, when no one was willing to buy costly RLNG, Gujarat government took the risk of contracting supplies at much higher prices than what were prevalent then. Now, the state is being penalised for its farsightedness,” says Saurabh Patel, Gujarat’s energy minister.

When the Gujarat government raised the issue of allocation of PMT gas for its Pipavav power plant, the government of India insisted that Pipavav power developers should tie up the gas at a market determined price. Even when GSPC won the tender to buy gas from PMT at market rate, the gas was not allotted to the state. Now, the central government wants to supply gas to Dabhol power plant at below market rates.

“While Gujarat government will not have any objection for this subsidy, it should not be at the cost of Gujarat customers. The subsidy has to be borne by the central government. The existing customers, who contracted LNG in 2004 and took great risks then, should not be asked to bear the additional burden of Rs 750 crore per year,” says Mr Patel.

As against the Rs 137 per MMBTU being paid by gas consumers in Gujarat, the suppliers are demanding Rs 209 per MMBTU, a huge increase of 52%.

Gail is laying a pipeline from Dahej in Gujarat to Uran in Maharashtra to supply gas to the Dabhol power plant. The central government, through Gail, is also planning to supply gas from Petronet LNG to other prospective customers in Maharashtra.

Petronet LNG is not only located in Gujarat, its coast-based terminals have been set up through a concession agreement with the Gujarat Maritime Board. When no other state was willing to pay a higher price for imported RLNG, Gujarat was took the risk of setting up LNG terminals.

It was then promised that the state’s gas demand will be met first, and only then will RLNG go outside. “But today, not only are they taking away the state’s share of gas, nut they are also arbitrarily hiking the prices gas, going against the long-term contractual terms,” says Mr Patel.