Confusion over India's demand for gas-IV: Power sector unlikely to provide a fillip
Jun 28: Given that India's primary demand drivers for a rise in gas consumption are weak, the gas supply lobby will always try and push for a tax on coal to make the use of gas viable in the power sector. 8But is that a viable proposition? 8At a gas price of US$5.50/mmbtu (which is in the ballpark of the US$5.56 ‘ceiling’ price for deep water gas in India), the tax per tonne of coal production would have to be roughly four and a half times its current amount (namely around US$27/tonne as opposed to US$6/tonne). 8This would be equivalent to a roughly 30 per cent increase in tariffs for coal-fired power, which would in present circumstances be politically difficult, if not impossible, to pass through to consumers. 8Therefore, the long-term substantial role for gas in India's power sector does seem viable as of now. Click on Reports for all the calculations.