Petroleum ministry sits on every reform: from empowering regulators to deciding on gas prices
One hopeful statement made on Budget Day came from the prime minister that the government would have to bite the bullet on subsidies. Key to this is the effective adjustment of petroleum prices. Thats the big subsidy bullet to bite. Unfortunately,the petroleum ministry under S. Jaipal Reddy,the petroleum minister,inspires little confidence. Remember,it was Reddys promise at the time of his appointment that he would not let oil companies bleed. But he is yet to show any inclination to consider raising prices of decontrolled petrol. Meanwhile,state-run oil-marketing companies are looking set to bleed by an under-recovery of Rs 1,39,000 crore,with banks unwilling to lend more for crude purchases. This lack of political will is not knew.
On the Cairn-Vedanta deal,despite a no-objection certificate from the home ministry,Reddy pushed for a fresh approval of the Cabinet Committee on Economic Affairs citing vague environmental,regulatory and human rights issues. It took the PMO three letters to prod Reddy to send the revised proposal. Last November,Reddys ministry threatened to amend the production sharing contract with Reliance Industries Ltd to disallow RIL to fully recover costs of developing the KG-D6 block as a penalty for the drop in gas output. But once RIL initiated arbitration,Reddy tried to stem the controversy saying there would be no changes in the PSC. The selection of a marker to stop adulteration of kerosene in diesel has been hanging fire since June 2010. Theres a complete sense of denial on giving additional responsibility to the Petroleum & Natural Gas Regulatory Board empowered to oversee the downstream sector.
Last month,the ministry told its Parliamentary Standing Committee that there was no proposal to set up an independent regulatory commission for gas pricing along the lines of the Central Electricity Regulatory Commission. With DGH still a quasi-regulator,clearly the ministry is no mood to let go of its control on the regulation of gas prices. The Ministry tried to avoid a representation from RIL for revisiting the KG-D6 gas price but the Empowered Group of Ministers,suo motu,acknowledged the argument for re-opening the pricing issue but now wants legal advice before coming to a decision. The ministry has been told to suggest an appropriate regulatory authority to aid and advise the EGoM on this issue. Given its record of stalling reforms,the ministry will need more prodding.