Market-linked price proposed to boost oil, gas output; coal stamps for ‘poor’ consumers

The Survey also proposed to restructure Coal India Limited during the 12th Five Year Plan as recommended by the T L Shankar Committee.

A fortnight after the government deferred the gas price hike by three months on June 25, the Economic Survey called for market linked pricing in a bid to boost domestic oil and gas exploration and production. In another proposal, the Survey has proposed to extend the food subsidy programme to coal.

It has proposed a subsidy scheme for coal where vouchers will be provided to ‘poor’ consumers of coal who in turn will pay the market price for the purchase of fuel. The Survey proposed to remove pricing distortions seen by consumers such as administered pricing for coal. The Survey has also said that paying lower price for extraction of minerals would lead to under investment by respective entities.

“In the field of natural resources where there is global trading, appropriate incentives for exploration and extraction in India are obtained when there is pricing parity with the world price excluding transport costs or taxes,” the Survey said. It has proposed to price domestic natural gas at FoB (free-on-board) rate for liquefied natural gas (LNG) imported into India by ships.

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“Auction-based procurement or fixed-price procurement has run into many difficulties. These can be avoided by using a percentage revenue share for the government, through which the government becomes a partner in sharing the risks of exploration, extraction and world price fluctuations, alongside the private firms,” the Survey said.

While current gas price of $4.2 per mBtu is one-third of the price at which India imports long-term LNG from Qatar, RIL, a key player in the segment feels that the price is not enough to produce from newer fields in the deep sea and has been seeking a rate equivalent to the import price of LNG. “If firms obtain a lower revenue per unit of mineral extracted in India, there will be under-investment in exploration and extraction,” the Survey said.

The Survey also proposed to restructure Coal India Limited during the 12th Five Year Plan as recommended by the T L Shankar Committee. “The process needs to be pushed through swiftly.”