Cut duty on LNG as feedstock for petrochemicals

New Delhi, Apr 24: The Gas Authority of India Limited (GAIL) has urged the government to cut the existing rate of customs duty on LNG from five per cent to zero per cent in order to bring it in parity with naphtha.

Official sources said GAIL Chairman and Managing Director Proshanto Banerjee had written to Petroleum Secretary M S Srinivasan suggesting that the fiscal benefits available to naphtha, when used as feedstock for petrochemical production, should be extended to LNG.

GAIL uses LNG feedstock for petrochemical production.

Mr Banerjee, in his letter, pointed out that the Finance Minister had, in his Budget for 2006-07, had reduced the customs duty on naptha used as feedstock for petrochemical production to zero.

Natural gas, including LNG, constitutes about nine per cent of the total primary commercial energy consumption in the country.

Against a widening demand supply gap of gas in the country, GAIL started gas import initiatives and commissioned detailed studies for LNG import to India.

GAIL's initiatives led to the identification of certain suitable coastal locations in Western and Southern India for the subsequent development of LNG import projects in India.

In July, 1997, the government, approved the formation of a Joint Venture Company "Petronet LNG Ltd (PLL)" for securing LNG supply at a competitive price and for the development of regasification acilities at Dahej and Kochi.

International Competitive Bidding by PLL led to the selection of Ras Laffan Liquefied Natural Gas Company Ltd, (Rasgas) as the preferred LNG supplier by PLL for its 5 MMTPA (million tonnes per annum) LNG Regasification Terminal at Dahej (Gujarat) and its proposed 2.5 MMTPA LNG Terminal at Kochi (Kerala). PLL has already signed the Sale and Purchase Agreement (SPA) with Rasgas for 25 years on Free On Board (FOB) basis.

PLL is setting up its first LNG Terminal for receiving and re-gasifying the LNG at Dahej in Gujarat. The Terminal is being set up at an estimated cost of Rs 2,600 crore. GAIL is the sole transporter and the principal marketer of the re-gasified LNG(R-LNG) from PLL. In order to evacuate Regassified LNG(R-LNG) from Dahej Terminal, GAIL is constructing a 610 km, 42 inch pipeline from Dahej in Gujarat to Vijaipur in Madhya Pradesh at an estimated investment of about Rs 2,930 crore.

Dahej-Vijaipur Pipeline (DVPL) will increase the gas transmission capacity along the HVJ corridor by an additional volume of 23 MMSCMD which will help in carrying RLNG from Dahej to the end consumers right up to New Delhi.

Total investment of the DVPL project, including new spur lines associated with DVPL is about Rs.3,200 crore. The completion of DVPL is scheduled to synchronize with the delivery of RLNG from Dahej.

GAIL is the principal marketer of RLNG delivered by PLL.

GAIL has entered into a Gas Sale and Purchase Agreement (GSPA) with PLL in September, 2003 for the purchase of 60 percent of RLNG from their Dahej Terminal for a period of 25 years.

GAIL has already tied up with a number of customers in Power, Fertiliser, Glass, Ceramics, Automobiles, Paper and other industrial customers for RLNG.

RLNG, which is natural gas, meets many of the requirements for fuel in a modern day industrial society as it is efficient, pollution free and more economic as compared to the competing liquid fuel alternatives.

GAIL was set up in 1984 to create gas sector infrastructure in India. In recent years, it has expanded into Gas Processing, Petrochemicals, Liquefied Petroleum Gas Transmission and Telecommunications. The company has also extended its presence in Power, Liquefied Natural Gas re-gasification, City Gas Distribution and Exploration and Production through equity and joint venture participations.

It has India's largest gas-based Petrochemicals Complex at Pata in Etawah district of UP, with an installed capacity of 260,000 TPA of Polyethylene (HDPE,LDPE,LLDPE)

UNI