last week, when the Government doubled the price of natural gas, several questions were raised by various experts. While, the idea of raising the price was propagated as a means to help out companies that were granted exploration and extraction rights over the past decade, it did not go down well with the end consumers. The policymakers’ financial prowess and ability to think ahead has also come under a cloud.
Experts are concerned that while India wants to acquire energy independence by 2030, this step does not augur well for the nation. There are severe apprehensions that high gas prices will significantly pull down the interest in gas-fired plants, which is apparently, one of the cleanest sources of electricity. A primary reason, why the Power Ministry, a key consumer, resisted the move to jack up gas prices.
The price of natural gas, which was doubled from $4.2 per million metric British thermal units (mmBtu) to around $8.4 mmBtu, amounts to an administered price increase for the production of natural gas in the private sector. Experts are critical and say that the benefits of this price increase, which was opposed by the power ministry will accrue to a few companies only.
It is not just the price hike which is raising eyebrows but also the lack of any future planning regarding the price trend, which was prevalent at the time of awarding the production sharing contracts to the companies. In its crucial role as the custodian-cum-guard of vast natural resources, the government needs to exercise more caution while awarding licences for these. However, it has failed dismally in the task, ending up favouring a chosen few.
Natural gas is a complex issue where investments on exploration and extraction are massive and every new technology is more expensive than the previous one. Critics say that if the whole idea was to link price fixation to the global market, it should have been done before putting up the gas blocks for auction. Freeing the gas prices and linking it to international prices is like windfall to the present licensee companies. Oil India , ONGC in the public sector and Reliance in the private sector stand to gain the most with this.
With rising gas prices, there is going to be a significant rise in the common man’s monthly bill for piped gas and CNG, which will force auto and bus fares to go up. In addition, the power cost will also go up. While the government claims that it will soften the impact by providing higher subsidy, the Centre’s annual subsidy bill will inflate leading to fiscal burden and inflation hurting common man’s home budget.