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Gas pipeline grid planned, budget may bring cess

business Updated: Jul 01, 2009 01:53 IST
Anupama Airy

The budget next week is expected to announce the creation of a Rs. 30,000-crore national gas highway scheme to build a 6,000-km gas pipeline grid that would criss-cross the country. The government plans to help its funding by levying a cess on gas supplies.

With the recent discoveries of natural gas by ONGC and Reliance Industries on the Eastern offshore of India, the domestic natural gas production is set to surge. But transporting the gas remains a major challenge, particularly in the central, southern and eastern regions not covered by gas pipelines. The pipeline network is expected to address that problem.

"A cess of about $ 0.20/ unit (or Rs. 0.35 / unit) is proposed to be levied on the gas supplied in the country (presently 125 MMSCMD)," a senior Petroleum Ministry official told Hindustan Times.

"The petroleum ministry is considering formation of a cess fund similar to gas pool account for collection of cess, which may be used for financing the gas highways," the official said, adding that GAIL was expected to be the implementing agency for the scheme.

The proposed scheme will involve an agency on the lines of the National Highway Authority of India, which is partly funded by a cess on sale of petrol and diesel.

If implemented, the funds generated through the gas cess would be to the tune of Rs 1,600 crore per year. "However, the funds generated through the cess may not be sufficient and we need to look at some other funding alternatives as well. Around Rs 5,000 crore per year would be required to set up 1,000 km of pipelines in a year," the official said.

Gas consumption remains largely restricted to the western states where gas has been found, and there is a need to take it to the southern, central, eastern and north-eastern parts, government sources said.