Gas price hike to benefit state-run firms more: Moily

Oil Minister M Veerappa Moily denied CPI MP Gurudas Dasgupta's allegations of favouring RIL as baseless

The Union Ministry of Petroleum and Natural Gas on Friday denied charges against it by Communist Party of India Member of Parliament Gurudas Dasgupta and said a gas price rise would benefit state-run companies more.

“More than 60 per cent of the natural gas in India is still produced by public sector companies and hence a price hike would not be in favour of any private company in particular,” the ministry said on Friday.

Dasgupta had alleged the ministry was working in favour of benefiting the Mukesh Ambani-owned Reliance Industries Ltd (RIL) to the tune of thousands of crores.  

Pushing for a price rise, Petroleum Minister M Veerappa Moily said in a statement, “Gas prices in India can incentivise investment in the Indian upstream sector so that the production in India reaches optimum levels and all explorable reserves are put to production expeditiously. Natural gas is imported in India at $14 – 15 per mBtu, more than double the proposed revision in gas price.”

Moily also said the recommendations by the Rangarajan committee on pricing was subject to Cabinet clearance and the Cabinet note prepared would include the views of all other ministries.

The government had constituted a committee under the chairmanship of C Rangarajan, chairman, Economic Advisory Council to the Prime Minister, in May, 2012 to suggest the structure and elements of the guidelines for determining the basis or formula for the price of domestically produced gas in India.  

“The committee submitted its report in December 2012 and the ministry is in the process of finalising a Cabinet Note to be placed before the Cabinet Committee of Economic Affairs for a decision on the recommendations,” Moily said.  The proposed guidelines will be effective from April 1, 2014.

In 2012-13, average natural gas production was about 111 mscmd, as against a requirement of approximately 286 mscmd.  The gap between demand and supply is likely widen during the 12th five-year Plan, if effective steps are not taken expeditiously to enhance domestic production. The annual import bill for import of oil and gas is approximately $160 billion.

According to the ministry, the estimated financial outgo on account of import of natural gas is likely to increase to $17.82 billion in 2016-17 from $8.79 billion in 2012-13. “Apart from its impact on the fiscal imbalance, heavy dependence on import also increases the subsidy burden for the power and fertiliser sector,” the statement said.

He added the subsidy outgo for fertiliser and power will be two to three times more if these sectors remain dependent on imported Liquified Natural Gas (LNG). “Therefore, the choice is between import of LNG at a much higher price and the relatively cheaper domestically produced natural gas.”