Alternate reality

THE forthcoming Budget is expected to have major implications for the LNG industry as the country prepares itself to import this alternative fuel for the first time in December ''03.
LNG and its importance as a fuel is now more relevant, especially in the event of recent gas discoveries off the Indian coast. The major fiscal concessions expected in this budget for the LNG sector include reduction of import duty on LNG to nil from 5% — categorising the product as a declared good — reduction of duties on project imports for gassification plants and declaration of the product in the infrastructure category.
The government and, in particular, the petroleum ministry is currently trying out ways and means to make LNG competitive vis-à-vis the domestic gas. Since LNG is slated to be imported for the first time, the government is committed to make some provisions in the budget by which the product can compete as an alternative fuel.
The importance of the first project in this sector, Petronet LNG’s Dahej plant, was further emphasised during deputy prime minister LK Advani’s visit to Qatar.
Reiterating the government’s commitment to the project, he said India needs all such projects to improve the energy economics of the country. The petroleum ministry has demanded infrastructure status for LNG under section 10 (23G) of the Income Tax Act 1961 — like power generation and power transmission projects. Although LNG is likely to be relatively more expensive than the subsidised gas available in the country, petroleum ministry sources argue that industries, mainly in the fertiliser sector that are operating on naphtha may switch to LNG if the price is competitive.
In fact, if the recommendations for the gas price revision is carried out, LNG may even compete with gas as a feedstock for power and fertiliser sectors. Talks are currently on with the gas supplier in Qatar to renegotiate the price at which gas will be supplied for the Petronet project. Shell, the other company developing an LNG terminal at Hazira, is also learnt to be going ahead with its project, with favourable measures expected in the forthcoming budget.