End gas subsidy for power, fertiliser units, says panel

A government committee on the allocation of natural resources has recommended that natural gas should be sold at market rates, doing away with the practice of subsidising the fuel for power and fertiliser plants.

 The committee, headed by former finance secretary Ashok Chawla and comprising senior government officials, said power companies should not be supplied cheap natural gas as most of the electricity they generate is sold in the open market, and it was not clear if subsidies actually translate into cheaper supply.

 The committee has proposed that even fertilizer plants should not be provided subsidized gas, as the government aims to reform the subsidy regime in the sector, moving to a consumer-based subsidy regime.

 The power and fertiliser sectors are the biggest gas consumers, taking up nearly 75 per cent of the country's gas supply. The government has given them priority in allocation of the scarce resource over other sectors.

 Recently, the government directed Reliance Industries Ltd to cut gas supplies to "non-core" sectors such as steel to make sure power, fertiliser, and domestic cooking gas units are adequately supplied from the D-6 field, which has seen a drop in output.

The committee has suggested that instead of a gas pooling arrangement, gas suppliers who have a contract to supply gas to customers should sell their output to a government agency at an agreed price and the agency can then resell the gas to the market or to allocated consumers.