Cabinet approves ‘Natural Gas Marketing Reforms’

The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi has approved ‘Natural Gas Marketing Reforms’, taking another significant step to move towards a gas-based economy.

Oct 7, Delhi: The objective of the policy is to prescribe the standard procedure to discover the market price of gas to be sold in the market by gas producers, through a transparent and competitive process, permit Affiliates to participate in the bidding process for the sale of gas and allow marketing freedom to certain Field Development Plans (FDPs) where Production Sharing Contracts already provide pricing freedom.

The policy aims to provide a standard procedure for the sale of natural gas in a transparent and competitive manner to discover market price by issuing guidelines for sale by the contractor through e-bidding. This will bring uniformity in the bidding process across the various contractual regimes and policies to avoid ambiguity and contribute towards ease of doing business.

The policy has also permitted Affiliate companies to participate in the bidding process in view of the open, transparent and electronic bidding. This will facilitate and promote more competition in the marketing of gas. However, rebidding will have to be done in case only affiliates participate, and there are no other bidders.

The policy will also grant marketing freedom to the Field Development Plans (FDPs) of those Blocks in which Production Sharing Contracts already provide pricing freedom.

These reforms will build on a series of transformative reforms rolled out by the Government in the last several years. These reforms in the gas sector will further deepen and spur economic activities in the following areas:

• The whole eco-system of policies relating to production, infrastructure and marketing of natural gas has been made more transparent with a focus on ease of doing business.

• These reforms will prove very significant for Atmanirbhar Bharat by encouraging investments in the domestic production of natural gas and reducing import dependence.

• These reforms will prove to be another milestone in moving towards a gas-based economy by encouraging investments.

• The increased gas production-consumption will help in the improvement of the environment.

• These reforms will also help in creating employment opportunities in the gas-consuming sectors including MSMEs.

• The domestic production will further help in increasing investment in the downstream industries such as City Gas Distribution and related industries.

The Government has taken transformative reforms in the upstream sector with a view to making investment easier focusing on ease of doing business. The Open Acreage Licensing Policy (OALP) which is investor driven acreage auction process, has increased substantial acreages in the country. No blocks were allocated between 2010 and 2017 which has impacted the long term viability of the domestic production. Since 2017 more than 1.6 lakh sq.km area under 105 exploration blocks have been allocated. This will ensure the sustainability of domestic production in long run.

The government brought a series of reforms in the Gas sector and as a result investment of more than Rs. 70,000 crore is being made on the East coast. Gas production from the East coast will contribute to Atmanirbhar Bharat by meeting the increasing energy needs of the country.

In February 2019, the Government implemented major reforms in the upstream sector and brought a paradigm shift by focusing on production maximization. Acreages under OALP rounds are being allocated based on work programme only in Cat II and Cat III basins.

The domestic gas production has complete marketing and pricing freedom. All discoveries and field development plans approved after 28 Feb 2019 have a complete market and pricing freedom.