India moving towards gas-based economy: President Kovind

Work happening to improve infrastructure and increase connectivity
India moving towards gas-based economy: President Kovind

President Ram Nath Kovind January 29, 2021 said India was striving to move towards a gas-based economy at the earliest. 

His address to both houses of Parliament noted that the government was steadfastly working to build infrastructure and increase connectivity to transport natural gas from the coasts to inland areas.

Kovind cited a number of examples.

The Kochi-Mangaluru gas pipeline was dedicated to the public few months back. Work on the Dobhi-Durgapur pipeline under the Pradhan Mantri Urja Ganga Gas Pipeline project was nearing completion.

This pipeline would supply uninterrupted gas to the states along the Ganga till West Bengal. A natural gas pipe project between Thoothukudi and Ramanathapuram in Tamil Nadu was under execution to supply gas to fertiliser plants and other key industries in the state.

The Union government had envisaged developing the National Gas Grid in 2019. At present, about a 16,788 kilometre-long natural gas pipeline is operational and about 14,239 km of pipelines are being developed to increase the availability of natural gas across the country, according to the government.

Delhi-based non-profit Centre for Science and Environment (CSE) had recently written to Union finance minister Nirmala Sitharaman.

CSE had stated that clean fuels — electricity and natural gas — had remained unaffordable and unreliable for industrial use. The upcoming Union Budget 2021 was an opportunity to incentivise such fuels and make them more competitive compared to coal.

This can help the country fight air pollution not only in Delhi and the National Capital Region (NCR), but across India. Natural gas taxation had clearly remained an impediment for its wide adoption, CSE researchers said.

This was highlighted in a new CSE study Analysing Industrial Fuel Policy in Delhi and NCR States, which was released in a webinar recently.

The study is based on an on-ground survey of industry clusters in Delhi-NCR. It has uncovered widespread use of coal in industry despite the availability of natural gas.

In fact, Delhi, even after notifying the approved fuel list that bans the use of dirty fuels across all sectors, is finding it difficult to enforce this in dispersed small- and medium-scale units.

Based on this assessment, CSE Director-General Sunita Narain wrote to the Union finance minister.

Her letter said:

Natural gas has a high tax burden currently. It is taxed both at the point of sale and purchase, and this means that tax as a component of the final prices can be as high as 18 per cent or more. 

“Gas, unlike coal, is not included in GST. The state tax share of natural gas relative to the total petroleum product revenue was roughly 20 per cent for Gujarat and 7 per cent for Maharashtra in the past year. Replacing this for such large industrial states should not be an obstacle. 

“Our understanding is that with five per cent GST (instead of 18 per cent state VAT and other taxes), the price for the industry consumer will reduce by 17 per cent. As gas has a higher calorific value and lower management costs, it will become attractive for industries to switch from coal to this cleaner fuel.” 

Narain’s letter pointed out that the ‘second clean fuel revolution’ was possible only with taxation and pricing reforms in favour of cleaner fuels.

It added: “Then, the displacement fuel was diesel for the transport sector. Now, the displacement fuel is coal. Its price is so low that natural gas, with its high tax burden, is unable to compete.”

Natural gas was easy to use and would have wide acceptability in the industry if it was affordable, Nivit Kr Yadav, programme director, industrial pollution unit, CSE, said.

“Industry accepts that gas for combustion is more efficient, cleaner, requires less maintenance, and most importantly, will reduce regulatory costs as pollution control is much simpler to do. At current fuel prices, however, shifting is difficult. Cost reduction is the key,” says

Yadav added:

We have compared the use of coal and gas in industrial areas around Delhi. Currently, fuel would cost industry one-two times more if it uses gas instead of coal. This high cost of input-fuel would make industry uncompetitive with its counterparts in other states and countries. Therefore, we have called for bringing natural gas in GST under the five per cent slab, reducing the cost of electricity supply to industries, and initiating necessary reforms

For the complete CSE study click here 

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