India: A fuel-starved nation

If you consider the politics surrounding international gas pipelines to be Byzantine, then you would be hard put to find the right words for pipeline politics at home.

With competing interests at work, it's no less complex and tricky to bring the gas from India's most promising offshore wells to the various states than it is to ferry the fuel across seas and continents to consumers in distant lands. That's why the country still does not have the slightest semblance of a national gas grid -- it was first proposed in 2003 -- even seven years after gas was struck in huge quantities in the Krishna-Godavari basin.

As more exploration companies report substantial discoveries, the absence of pipelines is now unsettling the mandarins.

At a recent round table on gas organised in Delhi by the India Energy Forum, the country's top oil bureaucrat sounded rather helpless when he bemoaned the lack of pipeline infrastructure.

Secretary of the Ministry of Petroleum and Natural Gas R S Pandey, said, "We have authorised several companies to set up pipelines but they are not doing it." He was referring to the nine pipelines authorised by the ministry in 2007, none of which have taken off.

Neither GAIL India nor Reliance Industries' pipelines subsidiary, Reliance Gas Transportation Infrastructure Ltd, have submitted even the detailed feasibility report for the nine trunk pipelines which would have put the outline of a grid in place.

Interestingly, these projects are now embroiled in yet another dispute between the regulator, the Petroleum and Natural Regulatory Board, and the ministry over their authorisation.

The regulator insists that only the board can grant approvals whereas the ministry maintains that authorisation was given before the board started functioning. According to the ministry, no authorisation has been issued by the government after the PNGRB Act came into force and has forwarded the dates on which the approvals were given to prove its point.

However, the stand-off persists.

The only trunk pipeline to have been completed is Reliance's Kakinada-Hyderabad-Uran-Ahmedabad link, better known as the East-West pipeline.

The 1,375-km pipeline, which the company won in a tender in 2004, was completed in March this year and is awaiting the regulator's nod for its tariff proposals. It is learnt that the board has invited bids from consulting organisations to study the cost and tariff structure proposed by RIL, which will be carrying its own gas from the D-6 block in the K-G basin to Gujarat.

The result is that the south, along with central and eastern India, is a yawning gap on the gas infrastructure map. This has all the potential to turn into a political hot potato.

Politicians from Andhra Pradesh, who have been complaining rather bitterly about the 'unfair treatment' meted out to the state despite the gas strikes having been made off its coast could be further incensed when they learn that two additional pipelines have been proposed from Kakinada to Gujarat.

One comes from the Gujarat State Petronet Ltd, a subsidiary of the state-owned Gujarat State Petroleum Corporation Ltd, which has also struck gas in the K-G basin. It has proposed a pipeline from Mallavaram (Kakinada) via Warangal, Wardha, Nagpur, Indore, Ratlam up to Bhilwara to ferry its own gas.

The other proposal has come from GAIL, which wants to build a pipeline from Kakinada to Bijaipur via Nagpur to connect with its Hazira-Bijapur-Jagdishpur pipeline, which runs from the Hazira terminal in Gujarat to Jagdishpur in Uttar Pradesh.

Andhra politicians allege a conspiracy to take all the gas to Gujarat and question the inability of the Centre to put together a rational utilisation policy that would allow as many of the states as possible to benefit from the discovery of cheap and clean fuel.

Rajya Sabha member from Andhra Pradesh, Mysura Reddy, complains that "it is highly discriminatory and totally unjustified that the pipelines should bypass Andhra Pradesh." The gas belongs to everyone and should be fairly distributed, he says.

Although the Centre has made allocations to fertilizer and power projects in Andhra Pradesh, analysts have pointed out that the fuel is going only to stranded assets in the state. Gujarat, on the other hand, they point is highly industrialised and has benefited greatly from the 1970s gas find in Bombay High.

Is the construction of two additional pipelines, which will run almost parallel to each, and carry the gas to highly-industrialised Gujarat justified?

Industry sources say that RIL is opposing these projects because its East-West pipeline has adequate capacity. Curiously, the regulator has turned over the proposals to a special pipeline advisory committee appointed by PNGRB for its expert views.

The six-member committee is headed by Pradip Baijal, a former secretary to the government who headed the Telecom Regulatory Authority and is currently a minor partner in Noesis Strategic Consulting, a Delhi-based outfit.

There are indications that a decision on the pipelines, which has the potential to become controversial, could be put on hold since Baijal has reportedly quit the committee, rather suddenly (on Wednesday).

It is yet another twist in the pipeline saga which could deepen political fissures because gas is clearly a political trump card, specially for Gujarat Chief Minister Narendra Modi who will be drawing political mileage from the K-G basin discovery.

Gujarat government sources are clear that all gas from its Deendayal fields will go to Gujarat. "GSPCL is a state-owned corporation and the chief minister has set a target of providing two lakh city gas connections every year," reveals a bureaucrat. "We have strict targets and we have to meet them."

But Modi has more ambitious plans with gas. It is learned that he plans to construct a gas pipeline to Jammu & Kashmir to supply gas to Jammu city and possibly, Srinagar. It is clearly a political programme for the BJP leader who, well-informed sources say, will be using cheap energy to win influence in the troubled state.

"What happens to the concept of equitable distribution and balanced development of the country?" queries a former bureaucrat who says the Planning Commission should ensure there is a fair use of cheap fuel across the country.

The MoPNG, it would appear, is not too sanguine about the prospect.

Pandey has proposed that the government should set up an organisation on the lines of the National Highway Authority of India to build a pipeline network across India. He suggests that a cess of 20 cents (one rupee) levied per mmBtu of gas consumption could yield revenues of Rs 3,000 crore (Rs 30 billion) annually. At Rs 5.5 crore (Rs 55 million0 per km of pipeline, India could get 500 km of the network in place every year.

"Some kind of national gas grid is absolutely essential," he says.

Given the performance of NHAI so far, that does seem like a desperate solution. But then these are desperate times for the ministry -- and a fuel-starved nation.