Govt may ban new LNG project, tighten imports

The LNG policy will be considered by the Committee of Secretaries before being forwarded for the cabinet’s approval, said the official from a state-run LNG firm.

The regulation of LNG imports is necessary to prevent gas demand-supply imbalances in different regions, ensure optimal use of infrastructure facilities, and to limit LNG imports which could be a drain on the country’s foreign exchange, he said. He said a panel of top bureaucrats will be appointed as the regulator with powers to fix a ceiling on the total cost of LNG imports into the country. "This will ensure reasonable and uniform prices of natural gas to downstream consumers," he said.

The ministry has also recommended infrastructure status for the sector to provide fiscal relief such as seven-year corporate tax holiday and lower interest rates on project finance. "LNG contracts are for 20 years-plus and require large investment. It is necessary to provide infrastructure status to the entire LNG chain as a fiscal incentive," the official said.

The ministry has also sought project import status for equipment required for setting up import and regasification terminals, building ships and pipelines. "This will allow project imports at a concessional rate of customs duty." In the draft policy, the ministry has suggested that the 16 per cent excise duty on LNG manufacturing and 16 per cent additional customs duty on LNG imports be abolished to keep consumer price of natural gas at economic levels.

"Since LNG is mostly used for power generation or producing fertiliser, higher duties would inflate power and urea prices." It also proposes a uniform sales tax on regasified LNG to avoid regional imbalances in the final price of natural gas.