Use of Natural Gas for Power Generation

8/6/2019 Use of Natural Gas for Power Generation

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IMPACTIMPACT OFOF CHANGESCHANGES ININ VARIOUSVARIOUS

TAXATIONTAXATION PARAMETERSPARAMETERS ONON GASGAS

PRICEPRICE..

T.K.CHATTERJEE (GM-NTPC)

USE OF NATURAL GAS FOR

POWER GENERATION


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0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Series1

Series1 25 90% 55 60% 0 90% 9 90% 2 70% 5 00%

Hydro Coal Oil Gas Nuclear Renewable

INDIAN POWER SECTOR:PRESENT GENERATION CAPACITY MIX

Govt. Vision: Reliable, Affordable and Sustainable

power for all by 2012 .


3/18

WORLD PRIMARY ENERGY MIX

6.51%

26.40%

37.30%

23.90%

6.14%

0.00%

10.00%

20.00%

30.00%

40.00%

HYDEL COAL OIL GAS NUCLEAR

HYDEL

COAL

OIL

GAS

NUCLEAR


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BENEFITS OF GAS BASED GENBENEFITS OF GAS BASED GEN

Less gestation period of gas based powerLess gestation period of gas based power

stationstation

clean environmentclean environment Proper energy mix to help improve country'sProper energy mix to help improve country's

energy security.energy security.

Improved EfficiencyImproved Efficiency


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RECENT DEVELOPM ENTSRECENT DEVELOPM ENTS

GAS SECTORGAS SECTOR

EnergyEnergy SecuritySecurity withwith balancedbalanced fuelfuel mixmix::CentralCentral toto GOIGOI agendaagenda..

NationalNational EnergyEnergy policypolicy:: underunderconsiderationconsideration

IncreasedIncreased thrustthrust onon SelfSelf sufficiencysufficiency ininHydrocarbonHydrocarbon SectorSector .. NELPNELP andand otherother

policypolicy initiatives,initiatives, inin lineline withwith HydroHydroCarbonCarbon VisionVision 20252025 .. PetroleumPetroleum andand NaturalNatural GasGas RegulatoryRegulatory

BoardBoard BillBill :: underunder activeactive considerationconsideration ofof

GOIGOI


6/18

RECENT DEVELOPM ENTSRECENT DEVELOPM ENTS

GAS SECTORGAS SECTOR

NaturalNatural gasgas pipelinepipeline policypolicy:: underunderconsiderationconsideration

TariffTariff commissioncommission :: ToTo looklook intointo gasgas pricingpricing

andand transportationtransportation tarifftariff AdventAdvent ofof LNGLNG :: DahejDahej andand HaziraHazira terminalsterminals

alreadyalready commissionedcommissioned.. ManyMany moremore onon thetheanvilanvil

TransnationalTransnational pipelinepipeline ::IranIran India,India, MayanmarMayanmarIndia,India, BangladeshBangladesh IndiaIndia PipelinesPipelines.. PartialPartial DecontrolDecontrol ofof gasgas pricingpricing byby GOIGOI


7/18

Demand is highly price sensitiveDemand is highly price sensitive

GAS REQT. FOR POWER SECTOR BY THE YEAR 2012GAS REQT. FOR POWER SECTOR BY THE YEAR 2012

PRICE (PRICE (USD/MmbtuUSD/Mmbtu ) DEMAND () DEMAND (MMSCMD)MMSCMD)

3.3. ..

3.3. 4 .4 .

4.4. ..

FOR GAS TO SHOW A BREAK AWAY GROWTH

GAS PRICES AFFORDABILITY IS THE KEY ISSUE


8/18

ELEMENTS OF GAS PRICINGELEMENTS OF GAS PRICING

Basic Price ,Basic Price ,

Custom Duties,Custom Duties,

Royalties,Royalties,

Transportation Charge,Transportation Charge,

Octroi, Entry tax, surcharge etcOctroi, Entry tax, surcharge etc

Servi

ce tax on Transportation.

Servi

ce tax on Transportation.

Sales TaxSales Tax

NEED FOR INTEGRATED FISCAL AND TAXATION POLICY


9/18

ILLUSTRATION OF ELEMENTSILLUSTRATION OF ELEMENTS

OF APM GAS PRICEOF APM GAS PRICE

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rajasthan Gujarat

Consu er price Tpt charges Royalty

S. Tax (Inter) Entry tax ServiceTax on TPT

Sales tax (Seller to Buyer) Turnover tax, surchargeetc.


10/18

CUSTOM DUTYCUSTOM DUTY

PresentPresent ::

ApplicableApplicable onon importimport ofof NaturalNatural GasGas throughthrough transnationaltransnationalpipelinepipeline :: 1010%%

ApplicableApplicable onon ImportImport ofof LNGLNG:: 55%%

DesiredDesired ::

ItIt isis desireddesired thatthat CustomCustom dutyduty bebe waivedwaived offoff toto makemake itit helphelp ininachievingachieving competitivecompetitive visvis----visvis otherother fuelfuel forfor powerpower generationgeneration

ImpactImpact onon FCOGFCOG::

ReductionReduction inin FCOGFCOG onon ImportedImported NGNG byby aboutabout 88--99%%

ReductionReduction inin FCOGFCOG onon LNGLNG byby 33--44%%


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SALESTAX/VATSALESTAX/VAT

PresentPresent::

SalesSales tax/VATtax/VAT onon gasgas -- 44%% toto 1212%%,, aa wide wide variationvariation acrossacrossstatesstates..

MayMay hinderhinder uniformuniform growthgrowth ofof gasgas basedbased powerpower plantplant acrossacross

statesstates..O

neO

ne ofof thethe artificialartificial considerationconsideration byby investorsinvestors whilewhilesettingsetting upup thethe gasgas basedbased powerpower plantplant

DesiredDesired

MeritsMerits abolitionabolition ofof salessales taxtax andand tilltill itit isis abolished,abolished, maymay bebeclassifiedclassified asas declareddeclared goodsgoods toto havehave uniformuniform salessales tax/tax/ VAT@VAT@

44%%..


ReductionReduction inin FCOGFCOG byby aboutabout 44%% toto 1212%% dependingdepending ononpresentpresent applicabilityapplicability ofofTaxTax..


12/18

OCTROI, ENTRYTAXETCOCTROI, ENTRYTAXETC

PresentPresent:: SomeSome ofof thethe statesstates likelike Rajasthan,Rajasthan, UU..PP..,, imposeimpose EntryEntry TaxTax

artificiallyartificially increasingincreasing thethe gasgas pricesprices

LikewiseLikewise somesome ofof thethe statesstates levylevy turnoverturnover tax,tax, surchargesurcharge etcetchinderinghindering uniformityuniformity ofof gasgas sectorsector developmentdevelopment

DesiredDesired::UniformityUniformity desireddesired.. StatesStates shouldshould considerconsider notnot toto imposeimpose thesethesetaxes/dutiestaxes/duties forfor thethe sakesake ofof uniformuniform unhinderedunhindered developmentdevelopment

ofof gasgas sectorsector growthgrowth acrossacross thethe countrycountry..ImpactImpact onon FCOGFCOG::

ReductionReduction inin FCOGFCOG inin statesstates likelike UPUP wouldwould bebe byby aboutabout 44%%


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TRANSPORTATION CHARGETRANSPORTATION CHARGEPresentPresent::

DifferentDifferent TransportationTransportation modelsmodels PrevalentPrevalent inin thethe countrycountry.. NonNon--uniformuniform tarifftariff alongalongHVJHVJ pipelinepipeline bybyTransporterTransporter forfor NGNG

PostalPostal tarifftariff @@11501150/MCM/MCM forfor NaturalNatural gasgas ForFor RLNGRLNG (Rs(Rs 500500/MCM/MCM withinwithin Gujarat,Gujarat, RsRs 540540/MCM/MCM outsideoutside

GujaratGujarat uptoupto Vijaipur,Vijaipur, && RsRs 640640/MCM/MCM beyondbeyond Vijaipur)Vijaipur) DistanceDistance basedbased byby GSPLGSPL

DesiredDesired::

FixFix transportationtransportation TariffTariff onon costcost plusplus reasonablereasonable returtnreturtn

basisbasis .. NeedNeed forfor IntroductionIntroduction ofofCommonCommon carrier/carrier/ ContractContract carriercarrier

conceptconcept

OpenOpenAccessAccess onon NonNon DiscriminatoryDiscriminatory basisbasis

RegulatorRegulator toto OversseeOverssee thethe sectorsector

FosterFoster growthgrowth byby openingopening upup thethe sectorsector ..


14/18

SERVICE TAX ONSERVICE TAX ON

TRANSPORTATIONTRANSPORTATIONPRESENTPRESENT::

1010%% onon transportationtransportation chargecharge..

DESIREDDESIRED::

ImpopsitonImpopsiton ofofServiceService taxtax bebe withdrawnwithdrawn


ReductionReduction inin FCOGFCOG byby aboutabout 11--22..55%% dependingdepending uponuponactualactual costcost ofof gasgas andand thethe transportationtransportation chargecharge..


15/18

OVERALL IMPACTOVERALL IMPACT

Exemption/rationalisationExemption/rationalisation inin duties,duties, taxes,taxes, levieslevies alongalongwith with transportationtransportation costcost (excluding(excluding royalty)royalty) asas aboveabovewouldwould resultresult intointo aa substantialsubstantial reductionreduction inin landedlanded pricepriceofof gas(gas( saysay aboutabout1515%%toto 3535%%))

ThisThis wouldwould gogo aa longlong wayway inin makingmaking itit competitivecompetitive visvis----visvis otherother availableavailable fuelfuel forfor powerpower generationgeneration

TheThe revenuerevenue lossloss byby wayway ofof reductionreduction inin taxestaxes etcetc.. maymaybebe mademade goodgood throughthrough increaseincrease inin incomeincome fromfrom

increasedincreased economiceconomic activityactivity

TAXATIONTAXATION POLICYPOLICY SHOULDSHOULD ALIGNALIGN WITHWITHGOIGOI POLICYPOLICY OFOF FOSTERINGFOSTERING NATURALNATURAL GASGASUSEUSE..


16/18

GOVT. SUPPORT SOLICITED FORGOVT. SUPPORT SOLICITED FOR

INTEGRATED FISCAL AND TAXATIONINTEGRATED FISCAL AND TAXATION

POLICY: WAY FORWARDPOLICY: WAY FORWARD ToTo implementimplement aa comprehensivecomprehensive reformreform ofof thethe fiscalfiscal regimeregime forfor

naturalnatural gas/LNGgas/LNG inin lineline withwith GOIsGOIs planplan toto increaseincrease shareshare ofofGasGas basedbased powerpower generationgeneration,, andand toto reflectreflect itsits environmentalenvironmentalbenefitsbenefits throughthrough taxtax incentives/lowincentives/low levellevel ofof taxtax inin gas/LNGgas/LNGchainchain..

FiscalFiscal regimeregime forfor naturalnatural gasgas shouldshould lowerlower thethe overalloverall burdenburden ofoftaxationtaxation onon gasgas supplysupply chainchain inin orderorder toto promotepromote growthgrowth ofof gasgasrelativerelative toto otherother fuelsfuels (especially(especially coal)coal) inin powerpower sectorsector

SalesSales tax/VATtax/VAT shouldshould bebe setset atat zerozero oror atat aa nominalnominal levellevelreflectingreflecting thethe lowerlower emissionsemissions fromfrom gasgas..

TillTill thisthis isis achieved,achieved, naturalnatural gas/RLNGgas/RLNG maymay bebe classifiedclassified asasdeclareddeclared goodsgoods toto havehave uniformuniform levellevel ofof taxationtaxation acrossacross thethe statesstatesinin lineline withwith thethe CSTCST @@44%% onon coalcoal..


17/18

GOVT. SUPPORT SOLICITED TAXATIONGOVT. SUPPORT SOLICITED TAXATION

POLICY: (CONTD.)POLICY: (CONTD.)

ToTo considerconsider removingremoving thethe customcustom dutyduty onon importsimports ofof LNG,LNG,TransnationalTransnational naturalnatural gasgas andand equipmentequipment && materialsmaterials usedused ininNG/LNGNG/LNG value value chain,chain, which which significantlysignificantly raiseraise thethe costcost ofofbuildingbuilding regasregas terminal,terminal, transmissiontransmission lineslines andand locallocal distributiondistributionnetworksnetworks..

BoostBoost investmentsinvestments intointo allall partsparts ofof thethe gas/LNGgas/LNG chain,chain, bybyexemptingexempting gasgas--relatedrelated investmentinvestment fromfrom taxationtaxation..

ProvideProvide incentiveincentive toto useuse gasgas forfor powerpower generationgeneration

ProvideProvide taxtax holidayholiday forfor allall projectsprojects inin gas/LNGgas/LNG chainchain includingincludingLNGLNG importimport andand regasregas facilityfacility..

EnsureEnsure priceprice affordability,affordability, reliabilityreliability andand competitivenesscompetitiveness withwithotherother fuelsfuels forfor powerpower generationgeneration byby way way ofof fiscalfiscal andand taxtaxreformsreforms..


18/18

THANKYOUTHANKYOU

Use of Natural Gas for Power Generation

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