Uncertainty over the implementation of new natural gas price formula, and the dilemma over whether to continue with the existing production sharing contract (PSC) for oil and gas explorers or to shift to the new model suggested by the Vijay Kelkar Committee where the explorers would have to share revenue with the Government, are the two major issues which the new Petroleum Minister Dharmendra Pradhan will have to tackle.
Poor output from the KG-D6 fields, subsidy burden, partial de-regulation of diesel prices, as well as the increase in petrol prices, are also some of the significant issues which the new minister will have to deal with.
Pradhan, who took charge of the Ministry for Petroleum and Natural Gas (MoPNG) on Tuesday - a day after the BJP-led NDA Government assumed office under the Prime Ministership of Narendra Modi - countered questions about all the pending issues of the ministry by saying that he will have a discussion with his officials on them and try to gauge the finer points.
The new minister in fact pointed out that India could become an economic super power if self sufficiency in the energy sector is achieved.
Pradhan, a Minister of State with Independent Charge, has asked the ministry officials to make presentations before him on all the significant issues.
Official sources said that the presentations have been prepared, and these are on issues like the PSC as well as the gas price. Also the partial decentralisation of diesel prices and the subsidy burden on the ministry owing to sale of diesel and gas at less than market price, are also on the agenda for discussion between Pradhan and his officials.
While the new minister chose not to comment on various issues facing the ministry, sources pointed out that the gas price issue is on top of the priority list as the UPA regime had postponed the implementation of the new gas price regime (which was to originally come into effect from April 1, 2014) till the conclusion of the lok Sabha polls.
In response to the delay, the Mukesh Ambani-led Reliance Industries ltd (RIl) had gslapped an arbitration notice on the Government. Sources said that the new Cabinet will now have to take a decision on the issue, mainly on when to implement it and also to keep in mind whether it will implemented with retrospective effect.
The then UPA Government in 2007 had fixed the price for supply of gas from KG-D6 fields at $4.205 per mmbtu for the initial five years of production. The output started in April 2009, and thus the pricing formula expired in March 2014.
later a panel headed by the then Chairman of the Prime Minister’s Economic Advisory Council (PMEAC) C Rangarajan had recommended a new formula under which the price almost doubled at $8.3 per unit. The gas price under this new formula was to come under implementation from April 1, 2014 onwards. The UPA Government however keeping the impending lok Sabha polls (which began on April 7) in mind, deferred its implementation till their conclusion.
Apart from this, the PSC issue will also require the new minister’s focus. According to the existing PSC, the explorer after recovering his cost from the fields, does not share revenues with the Government. According to the Kelkar Committee’s suggestion, the new PSC has a clause where the explorer will have to share revenues with the Government.
The UPA Government, however, could not take a decision whether to accept the new PSC. Pradhan, therefore, will have to deal with the vexed issue in the coming days.