A matter of signals

A matter of signals
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First Published: Wed, May 09 2007. 01 23 AM IST
Updated: Wed, May 09 2007. 01 23 AM IST
It is being argued that infrastructure hurdles (read regasification terminals) have been the key reason why industries continued to use costlier fuels such as naphtha as India could not import much of the cheaper LNG. This is simplistic.
Look at the two major consumers. In the power sector, the producers’ fixed costs have been paid for by the state electricity boards and the fuel costs are a pass through as well—so producers have had no strong incentive to negotiate hard for LNG spot cargoes. And in the case of fertilizers, the government’s pricing policy has meant it bears the burden of the costlier naphtha.
It is now that the growth pressures on these sectors are mounting and the demand for LNG is picking up. But, had the right market signals been in place, the incentive to switch to LNG would have been higher, which would have triggered the needed investment in terminals. This surely points to the fact that policy has to be forward-looking.
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First Published: Wed, May 09 2007. 01 23 AM IST
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