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Moily rules out rolling back gas price hike

Moily says CCEA decision stands; new prices will vary, not fixed at $8.4 per unit as widely expected
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First Published: Thu, Jul 11 2013. 05 35 PM IST
A file photo of petroleum minister M. Veerappa Moily. Photo: Ramesh Pathania/Mint
A file photo of petroleum minister M. Veerappa Moily. Photo: Ramesh Pathania/Mint
Updated: Thu, Jul 11 2013. 11 22 PM IST
New Delhi: Petroleum minister M. Veerappa Moily, under fire over the government’s recent decision to increase the price of gas produced in the country, ruled out a review of the decision taken by the cabinet committee on economic affairs (CCEA).
“The CCEA-approved gas pricing guidelines 2013 will be applicable for all natural gas for all sectors uniformly... There is no thinking on part of the government for any review or reconsideration of the decision of the CCEA. Let me make it very clear. There is no confusion, there is no vagueness. And I don’t think there is scope for any interpretation whatsoever,” Moily said at a press conference in New Delhi on Thursday.
The government raised the price at which natural gas will be sold to producers of power, fertilizers, minerals and steel, benefiting gas producers including Mukesh Ambani-led Reliance Industries Ltd (RIL) and state-run Oil and Natural Gas Corp. Ltd. The price increase is to take effect from 1 April next year.
Commenting on the $8.4 per million British thermal units (mmBtu) price being widely quoted and coming into effect from the first quarter of the next fiscal, Moily said, “I don’t know from where this price has come. For the April-June quarter, it would have been $6.83 per mmBtu. I can’t predict what will it be then. It can be lower or higher as well.”
He didn’t explain the math behind the calculation.
A panel headed by C. Rangarajan, head of the Prime Minister’s economic advisory council, had suggested a pricing formula in which the final base price was arrived at by the simple average of the respective weighted averages of the prices of imported gas across sectors over a 12-month period and that of prices in the three major international gas trading hubs. These are the US Henry Hub, the UK National Balancing Point and Japan’s custom-cleared rate. This would have priced the fuel at $8-8.5 per mmBtu from $3.5-5.73 now. The price of gas produced at RIL’s deep water KG D6 field off the east coast was fixed at $4.2 per mmBtu by an empowered group of ministers on 12 September 2007. That price is valid till 2014.
“We will abide by Rangarajan panel’s recommendations,” Moily said.
Moily’s statement comes after the finance ministry asked the oil ministry in a communication dated 4 July to examine issues such as capping the gas price and ensuring RIL delivers any shortfall it owes to customers at the old price of $4.2 per mmBtu.
According to Reuters, these issues have been raised by various newspapers and the finance ministry asked for “appropriate” action on the same.
“This is not an instruction. It can’t be taken as an opinion or a query. My ministry is fully conscious of the issues discussed in the public domain. They have sought certain information, which will be given,” Moily said.
Petroleum secretary Vivek Rae added, referring to the finance ministry’s missive: “It’s not a directive.”
Moily further added that there was no proposal to cap prices.
“The CCEA’s decision stands and the government is not considering any change,” he added.
The gas price was decided against the backdrop of allegations by Communist Party of India leader Gurudas Dasgupta that Moily had helped RIL to increase the price of gas produced from the KG D6 offshore gas field.
Moily on his part has alleged that import lobbies were trying to exert influence on India— even intimidating ministers—not to raise the domestic prices of gas and not to reduce overseas purchases.
An RIL spokesperson declined to comment on the minister’s statement.
There has been discontent within the government and outside over the decision to increase domestic gas prices, overriding resistance from the ministries of power and fertilizer. The ministries of power and fertilizer are upset that key concerns, such as the pricing of domestic resources in foreign currency and the likelihood of a steep increase in the price of power, have been ignored.
On 20 March, Mint reported that the power and fertilizer ministries, which govern two of the biggest gas-consuming sectors, were opposed to the pricing formula recommended by the Rangarajan panel.
“Before the CCEA could take a decision, a note was circulated to the various ministries for consultations. We incorporated the suggestions in the CCEA note,” Moily said.
A senior official in the Prime Minister’s Office added that there were no differences within the government over policy decisions.
“There is no dispute among ministers or differences between the ministers and the Prime Minister over the decisions, be it gas pricing or the Jet-Etihad deal. Gas pricing is done. Nor is there any backtracking or backing out,” said the official, who didn’t want to be named.
Liz Mathew and Aman Malik contributed to this story.
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First Published: Thu, Jul 11 2013. 05 35 PM IST