Saturday, June 15, 2013

Hectic lobbying to increase gas price to provide bumper to Reliance Industries Limited


J Gopikrishnan / New Delhi
May 30, 2013

As the countdown has started for the end of the UPA Government, a move is underway to sharply increase the price of the indigenously produced natural gas. A Cabinet note shows that a section of the Government wants to bring the domestic price on a par with international rates. The move, which would come as windfall for Mukesh Ambani’s Reliance Industries Limited (RIL), has triggered sharp differences among various Ministries.

According to the note prepared by the Petroleum Ministry for consideration of the Cabinet Committee on Economic Power Ministries are opposed to any price hike, the Finance and Petroleum Ministries and Planning Commission are and Planning Commission varies (Million Metric British Thermal Units) and $14 per mmbtu.

The note released by CPI veteran leader Gurudas Dasgupta last week to the media clearly shows that Fertiliser and Power Ministry are opposing the hike citing national interest and fearing huge loss to exchequer.

Fertilizer and Power sector are the major consumers of natural gas. According to Dasgupta, the rate suggested by Finance, Petroleum and Planning Commission reflects the wishes of Mukesh Ambani’s RIL, which will be major beneficiary of the largesse. At present the Government is purchasing gas at the rate of $4.2 per mmbtu. This rate was fixed by an Empowered Group of Ministers (eGoM) few years back.

In a series of letters to Prime Minister Manmohan Singh, CPI(M) leader and member of the Standing Committee on Petroleum and Natural Gas Tapan Sen has pointed out that the current price of $4.2 per mmbtu itself is a bonanza to the RIL. In his letters, Sen pointed out that the RIL quoted $2.4 per mmbtu for supply of gas to NTPC in an international competitive bid.

The current controversy started after the Rangarajan Committee recommended a high rate of $8.2 per mmbtu for the purchases of domestically produced gas from April 2014, with provisions of specific increases in each stage in the coming five years. The committee’s report was submitted in December 2012. In India , the major gas producers are public sector undertakings ONGC and Oil India with around 60 per cent of total output, and the major private player is RIL, which started controlling the sector after its production started from KG Basin. According to the estimates of Petroleum Ministry, by 2016-17 the private players will control more than 50 per cent of the domestic gas production in India .

The Fertilizer and Power sectors will be hit hard in case of increase in the price of the gas from current level of $4.2 per mmbtu. Petroleum Minister Veerappa Moily’s arguments that the increase in price of gas would earn more revenue to the public exchequer were totally untenable as the Government had to shell out huge subsidies in Fertilizer and Power sector.

Moily’s arguments that ONGC and OIL India would benefit more did not take into account the fact after gas price hike, the Government would be required to pay huge subsidies in different sectors, which The ultimate beneficiary would be the private gas producing contractors, who wants to get money in dollars for a domestic production.

Is the UPA Government ignoring the interest of the nation over corporate interests?

[The report was published in ‘The Pioneer’ on May 30, 2013]