The two PSUs will share this right with the Gas Authority of India which has been given the status of principal marketeer in the two plans where the capital investment is $1,200 million. GAIL had sought exclusive marketing rights but the petroleum ministry reasoned that both BPCL and IOC have been losing business on naphtha which could be made up in the LNG retail business.

Further, GAIL has also diversified into other areas like power and petrochemicals which, sources say, would not justify giving the company sole marketing rights for LNG. IOC has identified this business as a key area of activity for the future and is in the process of setting up its own LNG infrastructure in specific regions in the north and east.

Petronet LNG is a joint venture of IOC, BPCL, ONGC, GAIL and NTPC where the five PSUs hold a combined 50 per cent stake. The balance will be taken up by other strategic and financial investors. The company has floated two subsidiaries- Petronet Dahej and Petronet Cochin - where 26 per cent will be held by IOC and BPCL respectively. The terminals in these locations are expected to be commissioned four years down the line while efforts are on to identify other sites.

The petroleum ministry is of the view that oil PSUs should be allowed to set up their own infrastructure for LNG imports so long as this does not compete directly with Petronet. The decision will be a shot in the arm to companies like IOC.

Sources say that both HPCL and BPCL would not be too inclined to go-ahead independently for their LNG plans as this would involve an enormous funds. It is only IOC that has the required financial muscle for the task. It has also been building a strong association with Petronas of Malaysia to work in key petro-related activities. In the local circuit, potential partners could be both ONGC and GAIL, companies in which IOC has picked up equity to the extent of ten per cent and five per cent respectively.

India's need for LNG is expected to substantially increase in the future with the commissioning of new power plants which would require the fuel as feedstock. Existing utilities which use naphtha are also planning to switch over to LNG as it is not only a cleaner option but is both easy to handle and cost-effective.