If India has to climb back to higher growth trajectory, it has to scale up output of oil, gas and coal. Indias gas consumption is a third of Chinas and a small fraction of that US. While some of the biggest producers have used the natural resources to power economic growth, India continues to rely on coal and oil for its energy needs. However, the 12th Plan projections shows a sharp rise in demand for gas from power, fertiliser and city gas sectors whereas domestic supply is unlikely to keep pace with that.
There has been hope that the domestic gas supply will increase to a great extent after the success of Reliance at KG-D6. However, KG-D6 output has started tapering. PSU explorersONGC and OILhasnt been able to scale up output either. Both PSUs and private firms want to invest more to extract more gas but the policy inertia over raising gas prices has delayed such investment.
The Rangarajan panel has suggested that natural gas price be raised to $6.8/mmBtu so as to push companies to invest more and hence raise the output. The government has accepted the suggestion amid objections from the power and fertiliser ministries. However, explorers wanted a steeper hike in gas prices as some of the deep sea blocks require higher investment and the price prescribed by Rangarajan may not be enough to cover that cost. The prospects will remain hazy unless domestic prices are aligned with global benchmarks.