Kochi: Kerala is expected to reap benefits from the Budget proposal to reduce the basic import duty on liquefied natural gas (LNG).
The move to cut the import duty to 2.5 percent from the current 5 percent will make the fuel cheaper by Rs 12 to 14 per unit, providing a much-needed boost to the existing and proposed LNG-based industries in the state such as power, fertilizers and chemicals.
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Currently, a host of industries in Kerala are making use of LNG as fuel. They include public sector undertakings such as Fertilizers and Chemicals Travancore Limited (FACT), Bharat Petroleum Corporation (BPCL), Kochi, and private companies like Tata Ceramics Limited, Malaya Rub Tech Industries, Nitta Gelatin India Limited etc.
The reduction in basic import duty could have a double impact. If the fall in prices improves demand, it will be a boon to the Petronet LNG terminal at Puthuvype as more commercial users will be switching to LNG looking for a price advantage.
FACT, which is the single largest customer of LNG in Kerala, will be able to make a gain of Rs 4 lakh per day if the price comes down.
Since the plant operates for about 300 days a year, the company will be able to save up to Rs 12 crore annually. As much 30,000 units of gas is required for the production of fertilizers and chemicals such as ammonium phosphate sulphate.
BPCL Kochi Refinery, the second largest purchaser of LNG in Kerala, is also expected to gain significantly from the customs duty cut and improve its revenues further.
When the proposed Kochi-Bangalore-Mangalore pipeline becomes a reality, more industrial units would opt for an LNG-based regime for their fuel needs.
The struggling Kayamkulam thermal power plant, which is ready for operation on LNG, could also revive its fortunes on the back of the reduction in customs duty. By replacing the costly naphtha with gas, the plant will be able to cut down production costs significantly.
However, the reduction in duty will not have any impact on the price of cooking (piped natural gas) under the city gas supply program, because, according to the government, currently the PNG prices are at comfortable levels.
