Ambani vs Ambani has taken attention away from the underlying issues concerning gas policy
T N Ninan / New Delhi Aug 29, 2009, 00:12 IST
Ambani vs Ambani has taken attention away from the underlying issues concerning gas policy. However riveting (or, let us concede, boring) India’s longest-running fraternal war may have become, it has fallen on Vijay Kelkar, the economist who is now chairman of the Finance Commission, to focus on the more important questions that should govern gas policy.
First, the good news. Dr Kelkar holds out the exciting prospect (in a lecture delivered last week) that India’s gas reserves could quadruple in a decade, from 30 tcf (trillion cubic feet) to 120 tcf. The production of gas could quadruple too—from 120 mmscmd (million metric standard cubic metres per day) to 500 mmscmd in a decade. Hard as this may be to believe, Dr Kelkar argues that we should be moving from a psychology of gas shortage to a surplus—indeed, only that will facilitate the policies that make possible the investment that will bring out more gas from the bowels of the earth. Finally, from a global warming point of view, he points out, gas is 25 per cent less polluting than oil, and 50 per cent less than coal.
What does this mean for policy? Dr Kelkar argues for a paradigm shift and market-orientation, with pricing that mirrors the oil market, since gas is a substitute for oil. The danger with taking such a position on pricing is that it might sound like he is arguing Mukesh’s case in the Ambani vs Ambani battle—and everyone is automatically considered either M+ or A+ in the battle (the equivalent in the old days of being R+ or R-, if you understand Delhi’s code). But the context and sweep of the lecture make it clear that Dr Kelkar’s sights are on a more distant horizon. He goes further and argues for an open pipeline policy, for an upstream gas regulator (there is only a downstream one just now), and other fairly obvious things.
If you subscribe to the theory that policies and laws reflect current power structures, the fact that the gas sector is dominated by one company and one entrepreneur means that policies are likely to be pitched to his benefit; even the minister for natural gas is an old-time Ambani friend and a Mukesh loyalist, so how much more obvious can it get? The problem with the Kelkar scheme, therefore, is that rational policies that work to the country’s long-term interests are likely to materialise only if there are multiple players and therefore countervailing interests. As proof, observers will cite the extraordinary tax holiday given in the latest Budget for the pipeline business, where Mukesh Ambani is the biggest investor (in fairness, it should be added, Reliance people argue that the pipeline taxation policy now is less friendly than it was last year).
It is not Mukesh Ambani’s fault that he is in the pole position that he is; his company invested in oil and gas exploration in areas where others either did not want to go, or tried and failed. Also, Reliance has the financial resources and has acquired the technological expertise to invest vast sums, and to operate in very difficult conditions. The company might well argue that the country should be grateful that it has improved the country’s energy self-sufficiency. Still, the kind of policies that Dr Kelkar argues for, which bestow no special favours on anyone, are more likely to come in a set-up where business lobbies either have little influence on government policy, or when other players emerge in the gas sector. The key question is whether either is a realistic expectation.
THE DISCUSSION ON THE GAS ISSUE IS VERY BALANCED AND HIGHLIGHTS EXACTLY
HOW SHOULD THE GAS POLICY HAS TO BE FROM THE NATIONAL VIEW POINT.
AS TATAS HAVE BOUGHT THE WATER STORAGES IN THE SAHYADRIES,OTHER COMPANIES ARE BUYING AND HOLDING THE LANDS NOW,TO BE CONTROLLED BY THEIR FAMILIES.
SOLUTIONS ARE GOING TO BE CHALLENGING FOR THE POLICY MAKERS,ONLY IF THE
RESOURCES ARE NOT TO BE GIVEN TI THE MIGHTY INDUSTRIAL COGLOMERATES
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