Having postponed the decision of implementing the new gas price regime based on the Rangarajan panel formula till September 30, the Government may seek law Ministry’s views on the matter and according to sources, there is a likelihood that it may rework some aspects of the formula in order to temper down the proposed hike in prices of the natural resource.
Though the Petroleum Ministry is quite guarded on the matter as of now, sources privy to the developments on this front indicated that a final decision is likely to be guided by political considerations, as the common man’s interests are involved.
As per the Rangarajan panel’s formula, the gas price is to double to $8 per mmBtu from the existing $4 per mmBtu, once it is implemented, and this will have a spiraling effect on the domestic economy. The new price was to be implemented from April 1, 2014 onwards, however the then UPA Government, mindful of the impending lok Sabha polls, had postponed its implementation till after the elections.
The NDA Government last month pushed its implementation further by another three months till September 30. In such a scenario, there is a likelihood that the formula suggested by C Rangarajan panel on determining gas prices could be tweaked in order to lessen the impact of hike in prices of gas.The panel in its report had suggested to the Government taking an average of the US, Europe and Japanese hub crude prices (or market price) and then averaging it out with the netback price of imported liquefied natural gas (lNG) to determine the sale price of domestically-produced gas.
Sources said that the ministry is apparently not happy over the inclusion of Japanese hub crude prices in the formula, as they are considered to be quite expensive and, therefore, it could go in for a change in the methodology. The ministry is also mulling seeking law Ministry’s views on whether any changes could be made in the panel’s formula.
Though a final call is to be taken on seeking law Ministry’s advice on the matter, sources said that political considerations are likely to influence any final decision regarding the gas price.
Government’s determination to insulate the common man from the impact of implementing the new gas price regime by finding ways of reducing its quantum has in fact given out a strong signal to Reliance Industries ltd (RIl) and its partner BP Plc of the UK. These entities have given an arbitration notice to the Centre seeking implementation of the delayed gas price rise.
The claim of the companies is that the Government’s failure to implement the new price from April 1 onwards, prevented them from sanctioning investments of almost $4 billion this year.Amid all this, Petroleum Minister Dharmendra Pradhan on Monday had informed the Parliament that the Government has imposed an additional penalty of $579 million on RIl for producing less than targeted natural gas from its KG-D6 block. With this the total penalty on RIl for missing the target in four fiscal years beginning April 1, 2010 now stands at a cumulative $2.376 billion.