Falling crude oil prices created window for reforms: Dharmendra Pradhan

Interview with Petroleum minister

The government has announced reforms in fuel pricing. Decontrolling diesel prices, a 33 per cent raise in the price of gas and relaunch of cash transfers for the cooking gas subsidy are steps aimed at controlling inflation, Petroleum Minister Dharmendra Pradhan tells Sudheer Pal Singh and Jyoti Mukul. Edited excerpts:

What is the thinking behind the recent reforms of fuel pricing?

The government has thought a lot before taking the decisions on diesel, gas and LPG (liquefied petroleum gas). The task before us was to ensure the common man was not unnecessarily burdened by inflation and that economic policy remained stable. The fall in crude oil prices offered some elbow room. There had to be a decisive movement to tackle the issues that could impair the public's confidence in the government.

Diesel decontrol looks like a good idea now. What happens when prices shoot up?

We think the current trend in crude oil prices is stable.

The government has talked about a premium for making deep sea gas exploration attractive.

There is a need to monetise discoveries in deep water, ultra deep water and under high pressure. Under the new pricing regime, data will be collected and the Directorate General of Hydrocarbons will analyse the merits of stakeholders' claims.

Why was it necessary to rework the formula for gas pricing?

There were serious faults in the Rangarajan formula. The Congress wanted gas to be sold costly. The existing price of $4.2 per mBtu (million British thermal unit) is based on the net calorific value. The Rangarajan formula price of $8.4 per mBtu was a camouflage in the sense it was based on the gross calorific value. Converted to net value, the price became $9.45 per mBtu. Also, Indian gas imports were given equal weight to world imports. Why should Japan's gas price be considered given that it is a consuming state?

What will be the rise in power and fertiliser prices due to the higher gas price?

We are ensuring a lot of cost savings. Consumers will be affected directly in compressed piped gas. We asked Indraprastha Gas whether the increase can be absorbed. They agreed. We think the gross underrecoveries of oil companies will come down to Rs 75,000 crore in the current financial year.

What is the next big thing expected from your office?

We are focusing on exploration policy, trying to take a relook at the economic, technological and administrative aspects to ensure early monetisation of discoveries. Second, steps are being taken to ramp up the refining sector's efficiency.