Reddy seeks PM's intervention in gas pricing

Andhra Pradesh chief minister YS Rajasekhara Reddy has written a letter to Prime Minister Manmohan Singh questioning the price discovery formula for domestic natural gas reportedly approved by the petroleum ministry.

He has sought the Prime Minister's intervention in the matter while reiterating the state government's request for appointing an independent market regulator to determine the upstream price of gas.

"It is reported that producers can now sell gas at prices determined through a 'transparent competitive bidding' process. But there can be no 'competitive bidding process' in a situation where the product is in huge shortage and the supplier is a monopoly. It will merely mean auction of a scarce product maximises the prices of gas to the advantage of the seller, facilitating profiteering," the chief minister pointed out in his letter.

Citing the practice in other countries, Reddy said there was no justification to link the price of domestically produced gas to any international fuel oil price.

Questioning the fixation of K-G Basin gas prices by Reliance Industries on the basis of price quotes received from 'select companies' with around $4.6 per MMBTU as the minimum quoted price, the chief minister said, "Bids have been obtained from power and fertiliser companies, both of which do not pay the price of gas. It is the Ministry of Fertilisers which bears the fuel cost of fertiliser companies, and for power companies, it is the consumers of state government who pay this cost in tariff."

Reddy maintained that there can be no discovery of market price by calling for bids from these companies.

He requested the Prime Minister to ensure a price mechanism which will be fair, just and truly transparent and which protects the interest of the consumers of the state.