The NDA Government sought to play the reforms card in the petroleum and gas sector as it went for complete decontrol of diesel prices in the wake of sharply dipping global crude prices, which fell from around $115 per barrel to $53.53 per barrel on the last day of 2014.The free fall in global crude prices, which became the highlight of the oil sector in the last three months of 2014, still continues as OPEC refuses to cut supplies of crude oil in an apparent bid to make the international sales of US’ shale oil, redundant.
Though according to experts, the development is good news for countries like India where the petrol prices fell by Rs 10 a litre over the past two months, the cut, they added, could have been much more if the Government had not hiked excise duty on both petrol and diesel twice between November 2014 and January 1, 2015, to fund infrastructure projects.
While it is an issue of debate whether the move to hike excise duty on both the fuels to fund infra projects is a prudent one or not, the Government, it is clear, has tried to balance the populist steps with political ones, taking advantage of global conditions. The Petroleum Ministry under Dharmendra Pradhan also expedited the vexed gas pricing issue by going against the recommended price of $8 per mmBtu, which was suggested by the Rangarajan panel (formed by the previous UPA Government), and fixed it at $5.61 per mmBtu, much against the industry’s wish.
However the new price of $5.61 per mmBtu is for normal discoveries, whereas for new discoveries, especially the deep-seated ones, it simply announced that a premium will be allotted. Mukesh Ambani-owned Reliance Industries ltd (RIl) though was the major entity which was affected by the decision, as it will not immediately be able to charge the new gas price owing to its pending arbitration with the Centre over alleged under production from the KG basin. The gas pricing decision by the NDA regime seems to send out a strong message to the corporate sector that it will not go soft on issues related to natural resources and national interest.
Though it would be interesting to see how the equation between the Centre and the corporate sector, especially in the oil and gas sector pans out. While diesel price deregulation and fixing of gas prices have been the two major steps taken by the NDA Government during its seven month existence at the Centre, the Petroleum Minister Pradhan still seems to be in learning mode as he has been making broad statements regarding prioritising the welfare of the poor and giving them first right over natural resources of the country, as well as underlining the need for taking strict decisions for the overall good of the common man.As far as global acquisitions are concerned, ONGC’s overseas arm ONGC Videsh ltd (OVl) met with some success by acquiring stakes in a major gas block Mozambique, as well as in fields in New Zealand and Brazil.