Gas Marketing Freedom Guidelines- Government bans sale of gas & CBM

The government has notified the Natural Gas Marketing Reforms on October 15, 2020. The guidelines have banned the natural gas and coal-bed methane (CBM) producers from buying their own produce in the newly notified gas marketing freedom guidelines.

Highlights

• The notification was approved by the Cabinet Committee on Economic Affairs.
• The Natural Gas Marketing Reforms provides the freedom to discover the market price of gas to the producers. The producers can discover the market through a standard e-bidding process.
• It also gives producers the liberty to market or sell the gas produced to anyone including affiliates.
• The guidelines say that the producer or any member of its gas field consortium cannot bid and buy the fuel
• However, the Sale to affiliates will be allowed if it affiliates to participate in the open competitive process. Though, the contractor or its constituents will not be eligible to participate in the bidding process.
• Under the new guidelines, Seller and buyer will not be the same entity.
• The new guideline provides the contractor to sell the natural gas through e-bidding. The bidding will be conducted by a panel maintained by the Directorate General of Hydrocarbons (DGH).

Background

The Reliance Industries had bid and bought all the gas it was producing from its Sohagpur East and West CBM blocks in Madhya Pradesh in 2017.  The company then used the gas at its petrochemical plants in Patalganga, Maharashtra;  Nagothane, Maharashtra;  Vadodara, Gujarat and Jamnagar, Gujarat. Reliance also outbid the gas utility GAIL India Ltd for gas from Sohagpur till March 2021. So, the GAIL criticized the move and highlighted the fact that Reliance had a 14% tax advantage in the bid since stock transfer within the company is not subject to VAT.