Modi discusses gas pricing, energy issues with ministers

RIL told that govt has the right to fix gas price

Prime Minister Narendra Modi on Friday took stock of the issue of domestic natural gas pricing, along with a host of other issues in the power, coal and new and renewable energy sectors. The two energy ministers  — Dharmendra Pradhan, petroleum minister, and Piyush Goyal, who handles the other three energy ministries —  along with the respective secretaries met Modi.

Prior to the meeting, the petroleum ministry was of the view that Reliance Industries Limited (RIL) should withdraw the arbitration notice filed by it, stating the government was well within its rights to fix the price of any natural resource.

Petroleum ministry officials opined that at this stage no dispute existed and, therefore, the notice was not tenable and they should be asked to withdraw the notice.

“The entire range of issues related to the petroleum sector, including the crucial gas pricing, ongoing disputes, issues related to states and their likely solutions would be discussed before the prime minister,” said a source.  The major highlights of the meeting also included steps to increase domestic oil and gas production, restructuring of production-sharing contracts, modalities of revenue-sharing format lined up for the next round of block auctions and a clarity on pricing of kerosene and cooking gas.

Batting for a higher price, the ministry of petroleum has made a case that the upstream oil and gas industry was inherently risky. Cost of wells range between $2 million and $150 million. Hence, exploration efforts are required or the country needs to import at a higher price.

The flexibility in production-sharing contract and empowering the upstream regulator, the Directorate General of Hydrocarbons, with more powers were also discussed.

On the issue of gross calorific value (GCV) and net calorific value (NCV), the petroleum ministry have sided with the fertiliser sector. The Rangarajan report is silent on the issue.

Pressing for a holistic review of the formulae, the ministry said, “NCV is higher by about 10 per cent for a given GCV price.” The price of $8.4 a million British thermal units (mBtu), which was about to be applicable from April 1 was on the GCV rate.

Former minister M Veerappa Moily had informed Mukesh Ambani-led RIL on April 21 that the new gas pricing formulae based on the Rangarajan committee report would be applicable from July 1. As per the formulae, the prices of domestic natural gas was about to be raised from April 1 this year, however, the general elections came as a roadblock in between. The prices from April1 were expected to double – from the current price of $4.2 per mBtu to about $8.2-8.4 per MBtu.

Petroleum ministry officials also briefed the PMO on the entire dispute regarding RIL arbitration and government's stand on it. Stating that it asked RIL to withdraw the case on decision to postpone implementation of revised price guidelines due to election commission regulations, the ministry said, "At this stage, no dispute exists and therefore, the notice is not tenable and has asked the contractor to withdraw the notice."

In his interaction with Modi, the flexibility in the production sharing contract and empower the upstream regulator Directorate General of Hydrocarbons (DGH) with more powers was also discussed.