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Govt defers gas price hike after Election Commission order

AAP leader Arvind Kejriwal, who had during his brief stint as Delhi chief minister ordered an FIR against oil minister M. Veerappa Moily and RIL chief Mukesh Ambani and others for allegedly conspiring to double gas prices, had asked EC not to approve the revision in rates. Photo: MintPremium
AAP leader Arvind Kejriwal, who had during his brief stint as Delhi chief minister ordered an FIR against oil minister M. Veerappa Moily and RIL chief Mukesh Ambani and others for allegedly conspiring to double gas prices, had asked EC not to approve the revision in rates. Photo: Mint

The decision will likely delay by at least a few months the revision of the gas price that attracted controversy when it was announced in June last year

New Delhi: The government on Monday deferred a gas price increase due to take effect on 1 April, acting on a directive by the Election Commission (EC), in a setback to domestic gas producers, including Mukesh Ambani’s Reliance Industries Ltd (RIL).

“After taking into account all relevant facts, including the fact that the matter is sub judice in the Hon’ble Supreme Court, the Commission has decided that the proposal may be deferred," the EC wrote to oil secretary Saurabh Chandra on Monday evening.

A top petroleum ministry official, requesting anonymity, said the decision has been deferred. “We have been asked by the EC to do so. Also there is a sub-judice case on the same."

The decision will likely delay by at least a few months the revision of the gas price that attracted controversy when it was announced in June last year.

Communist Party of India leader Gurudas Dasgupta and a non-governmental organization have petitioned against the gas-pricing formula approved by a cabinet panel that would have led to a doubling of the gas price from the current $4.2 per million metric British thermal unit (mmBtu) to nearly $8.4/mmBtu with effect from April.

The Aam Aadmi Party (AAP) has also sought a deferment of the gas price hike. AAP leader Arvind Kejriwal had in his short-lived stint as Delhi chief minister ordered a first information report against oil minister M. Veerappa Moily, Mukesh Ambani and others for allegedly conspiring to double gas prices.

RIL declined to comment on the development as it had not been formally informed of the decision by the government.

While the decision by the EC will not have any bearing on 80% of the gas sold in the country as producers like Oil and Natural Gas Corp. Ltd will continue to sell the fuel at existing rates and contracts, it would mean current sales contracts entered by RIL will have to be extended beyond the expiry of their term on 31 March.

RIL sells less than 14 million standard cubic metres per day of gas to over a dozen fertilizer plants at $4.2/mmBtu under a five-year contract that started April 2009. It had wanted to sign new contracts under the new price from next month.

In June, the cabinet approved a gas pricing formula suggested by a panel headed by C. Rangarajan, head of the prime minister’s economic advisory council, that would have led the price of gas supplied to domestic consumers like fertilizer and power plants to double.

Before the announcement that the gas price hike had been deferred, fertilizer companies said RIL had offered them softer terms in a term sheet for an interim agreement, as compared with the draft gas sales and purchase agreement (GSPA) that would have eventually replaced the existing GSPA.

RIL, in an emailed response to Mint, said it was still negotiating with fertilizer companies over the draft GSPA. The term sheet is an interim arrangement till the new GSPA is finalized.

Two fertilizer company officials said the term sheet was shared with them on 18 March while the draft GSPA had been forwarded to them on 6 March. The officials declined to be named.

The term sheet offered gas to fertilizer companies at government-notified prices and had a six-month tenure extendable to a year.

PTI contributed to this story.

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