Petroleum ministry asks Modi to resolve gas pricing formula

A decision on the new prices for RILs’ KG gas fields has to be taken before July 1, the date committed to the company.

Written by Amitav Ranjan | New Delhi | Published: June 16, 2014 12:45 am

As opposition grows against the proposed hike in natural gas prices, the petroleum ministry is writing to Prime Minister Narendra Modi to take a final call — along with ministers of concerned departments — on the pricing formula approved by the previous UPA government.

Last week, petroleum secretary Saurabh Chandra suggested his minister Dharmendra Pradhan to rope in the PM to review the entire gamut of gas pricing so as to finalise a decision before the deadline of July 1 — as indicated to Reliance Industries Ltd (RIL).

“(Petroleum Minister) may consider requesting the PM to schedule a presentation on the subject, in the presence of finance minister, ministers of power, chemicals and fertilisers and other ministers and officials concerned,” Chandra wrote on June 9.

“It is submitted that a decision on the new pieces for (RIL’s) KG-DWN-98/3 has to be taken well before July, 1 2014,” he wrote. Pradhan, said sources, would be writing to the Prime Minister this week.

Chandra’s move to take on board the BJP stalwarts heading these ministries follows sharp protest by BJP and its allies to near-double price of gas envisaged under the UPA-approved formula that was agreed to by the Cabinet Committee on Economic Affairs (CCEA) in June 2013 for implementation from 1 April 2014.

The notification of new price got delayed as the Election Commission deferred it until the Model Code of Conduct was lifted. The previous government did not raise prices even when the EC stay expired, leaving the decision to the incoming government.

The ministry on April 21 informed RIL that “the earliest possible date in the normal course for applying the revised prices would be July 1, 2014”.

RIL is selling gas from its eastern offshore KG-DWN-98/3 fields at the old rate of $4.2 per million British thermal unit even after its term had expired.

RIL has served arbitration notice on the Centre disputing the decision to postpone the implementation of revised price guidelines due to the EC order.

Petitions have also been filed in the Supreme Court against UPA’s decision arguing that the hike was devised to benefit RIL. According to the formula, firmed up by a panel under then PM’s economic advisory council head C Rangarajan, gas price would double to $8.3 per unit.

The ministries of power and fertilisers had opposed the formula even at discussions in the CCEA during the UPA regime.

Other stakeholders too criticised the formula over inclusion of benchmarks such as average spot purchase price of liquid gas and Japanese gas purchases.

The new formula was devised for effect from April 1 as the previous formula for pricing gas from NELP blocks, which was approved by an empowered group of ministers in 2007, was applicable until March 31.

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