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Last Updated : Mar 01, 2016 11:36 AM IST | Source: Moneycontrol.com

Budget 2016: Analysis on Oil and Gas sector

The Union Budget for 2016-17 did not address some of the key concerns regarding the oil and gas sector even as it announced a new scheme to encourage the adoption of LPG for cooking in rural India among below poverty line (BPL) households.


Siddharth Singh
Area Convenor & Research Associate Green Growth and Resource Efficiency Division

The Union Budget for 2016-17 did not address some of the key concerns regarding the oil and gas sector even as it announced a new scheme to encourage the adoption of LPG for cooking in rural India among below poverty line (BPL) households. With a focus on reducing indoor air pollution, the Finance Minister announced that 1.5 crore households will benefit from the Rs. 2000 crore allocation in 2016-17 to increase uptake of LPG cylinders. However, TERI’s studies show that considerable impediments remain in transitions from biomass to LPG, including the inefficiency of the supply chain and the unavailability of banking facilities that impacts the direct transfer of the subsidy and the adoption of LPG in rural India. This programme will therefore have to be complemented with a redressal of such issues in order to ensure success.

Further, the Minister announced that to promote India’s “self-sufficiency” in hydrocarbons, the government will put in place a premium on prices on natural gas extracted from High Temperature, High Pressure fields. However, this policy decision has been announced in the past by the Ministry of Petroleum and Natural Gas, but the quantum of the premium has not yet been announced. Additionally, there was no announcement made on either the next round of NELP auctions, or whether NELP would be replaced by a unified licensing framework. The 10th round of NELP has been due since 2014. We need a policy that clearly incentivizes exploration for oil and gas. The Minister did reiterate an earlier announcement of market linked prices for marginal fields, which is a positive move.

In sum, a few key questions and concerns remain that were not addressed in the budget. However, the announcements to increase uptake of LPG in rural India and the market linked pricing for natural gas in marginal fields are welcome moves.



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First Published on Mar 1, 2016 11:04 am
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