New Delhi: Consumers will be able to get cheaper gas after the country’s suppliers get to avail incentives, making it less expensive for them to set up pipeline networks to transport gas throughout the country.
The government has awarded ‘infrastructure status’ to gas pipelines, offering them tax holidays on profits for up to 10 years. The exemption has also been applied to storage facilities integrated to the gas pipeline network.
“The direct benefits to the consumers will be around 10% reduction in end prices,’’ said R. P. Sharma, president, liquefied natural gas business, Reliance Industries Ltd (RIL).
“Assuming our transportation cost was earlier expected to be Rs1,200 per thousand cubic metre (tcm) of gas it will now come down to Rs1,080 per tcm,” Sharma added.
Domestic gas supply is expected to reach 150 million metric standard cubic metre per day (mmscmd).
The infrastructure benefits will act as a catalyst for developing pipeline transmission capacities quickly, by attracting multiple players who will set up infrastructure at a faster pace. As of now, the market is dominated by the GAIL India Ltd, RIL and the Gujarat State Petronet Ltd.
“There is an urgent need to bring this gas to the consumer in the shortest possible time. Awarding the infrastructure status is a big step in the right direction as gas is the fuel of the future,” Ajay Arora, partner (oil and gas practice), Ernst & Young, said.
Though there are expectations regarding more gas from the current finds in the Krishna-Godavari basin and future discoveries from the Mahanadi basin, there is a growing demand supply gap in the country. Of the 160 mmscmd of gas demand in the country, the supply available is only of around 90 mmscmd. The demand is expected to touch 350 mmscmd by 2012.
“It’s a good move as it will help commission our pipeline by mid-2008,” Sharma said.