New Delhi: Petroleum minister Dharmendra Pradhan finds himself in the thick of policy change. Last week, the government signalled a rethink on the domestic gas-pricing formula when it deferred the increase in natural gas prices by three months. The formula to nearly double prices from the current $4.2 per million British thermal units was approved by the previous Congress party-led United Progressive Alliance government.

The ministry is now looking at another round of policy changes as the government takes stock of India’s energy security. In his first detailed interview after taking over as the minister, Pradhan spoke about the government’s immediate priorities and the direction of the policy change. The National Democratic Alliance is effecting a paradigm shift in governance, he said. Edited excerpts:

You have sent out a very strong message by making the statement that you are reworking the incentive regime for hydrocarbon exploration. What do you mean by this? Will you stick to the existing production-sharing agreement with oil and gas explorers or move to a new revenue-sharing one, with support emerging for both proposals?

From my understanding of this sector so far, this sector was opened up in the mid-1990s with a precondition of 100% FDI (foreign direct investment). It has been 20 years since and now if we do an assessment of this period, what are the big investments that we have got? Isolated cases are there, but the way it should have been done in hydrocarbon sector exploration, it has not happened.

Therefore, we have to make the sector investment-friendly. This could be done by our policy regime by complying with our Constitution. When our economy opened up in the early 1990s and private investments started to flow in, at that time, who should have had the right on the resources? It should have been with the state. But the state was with monopolies. You made policies to open up the state and bring in investments. So, the utility, rights, marketing and profit-sharing of the resource should have been reaffirmed and that did not happen.

Are you disappointed with the process?

I am disappointed in some cases because investments did not come in. In Atalji’s (Bihari Vajpayee) government, a new Electricity Act was brought in and after that power generation capacity increased in the state and so did private sector investments. That was a very transparent and progressive step.

Do you want to do something similar in petroleum?

We have to increase investments in the sector by derisking it.

How would you do that?

Through a transparent, progressive policy, according to the framework of the Constitution. It’s not only about cost recovery or revenue-sharing. On its canvas, there are things ranging form small reforms to major ones. Money has its own speed, investment has its own urgency; you need to give it space.

Why did you decide to defer the gas price increase that was due to take effect on 1 April. After all, your rail minister went ahead with a similar pending proposal to increase fares?

These are again sector-specific. So, do not relate the two. The arguments, which were built around gas pricing...when we say progressive, we mean it. The Rangarajan formula, which the previous government converted into a policy, had reservations from two of their own ministries—fertilizer and power. The finance ministry also had some cautious observations. Two standing committees had some observations and some cases were sub judice as well... But the government should have thought about end-user price. This is an energy security issue and the future of this country is linked to it. The country’s import bill strategy and forex reserve are linked to it.

Amidst all this, as a new government, it is our responsibility to maintain that the first right over India’s resources is of the poor. This is the paradigm shift that I am talking about.

How can this be done?

All these things can be done if there is a powerful government in place with a powerful leadership and then we will take a call on all these things. India’s USP is its market size and everybody has an eye on it. If anybody is doing business here, he would like to do it on his terms, but it is also possible that markets may dictate their own terms. If the market’s custodian is the state and leadership and it has the willpower, then things will be done. We need to build the Indian market on our terms as nobody can ignore the Indian market. Everyone’s eye is on India’s market size. This will happen when the market’s custodian, that is the state, which means the leadership, will have the willpower to do so. Sovereign is supreme according to the Constitution.

Recent actions suggest that Reliance Industries Ltd (RIL) and the government are headed for a faceoff. RIL has signalled that an increase in gas prices is a precondition for increasing investments in its gas fields. How do you react?

We have said that we will discuss with all the stakeholders. Government can’t be subjective. An objective view should be brought before the government. In a business, different stakeholders have their own viewpoint. It has to be given space. A decision will be taken considering all view points, keeping the national interest in mind.

I wouldn’t like to give a very reactionary statement to that. The government is the custodian of the economic interests of this country and finally all stakeholders may have their view, but we are confident that under a clear policy of the Indian government, a progressive and hassle-free policy of the government by building the capacity of the Indian market, we can bring confidence to the investor.

How will you manage the subsidy burden in petroleum, given that there is tradeoff between reducing subsidies and stoking inflation?

This is a dichotomy. Inflation needs to be controlled, but subsidy has to be continued by escaping the pinch of the subsidy burden. We have to continue providing subsidy to a certain set of consumers. We have to find innovative solutions. Hasn’t the time come for targeted subsidies? Innovative ways can be found. Can’t we find a transparent delivery mechanism? Right now, I am putting all of this in the public domain for a greater debate.

Will you resume cash transfers for the cooking gas subsidy using Aadhaar?

Those who started with the scheme stopped it. This is a sub judice issue. The court has put a question mark on the legality of Aadhaar. But BJP (Bharatiya Janata Party) as a party has been a proponent of the direct cash transfer for a long time. I will give you two examples. When we were taking the responsibilities of the state in the case of Ms Vasundhara Raje Scindia, when she was chief minister of Rajasthan from 2003-07, she started a direct cash transfer system there. In Chhattisgarh, where we formed the government for the third time, we buy paddy for around 13,000 crore—the entire fund gets transferred to the consumer.

A scientific temper is required in governance. We have implemented successful models earlier. But the last government’s implementation of Aadhaar was half-baked. It was motivated by political gains. The court has rejected it.

We plan to improve it for using it for inclusive growth and are in favour of direct cash transfer for the same. We never said it was a bad idea.

You have had a baptism by fire. The poor safety record of oil and gas public sector units. GAIL’s pipeline incident is one of the many in the long list of tragedies in which state-run companies are involved. The incident will further impact the development of the pipeline infrastructure due to the opposition from the states. Why can’t there be a mechanism for improving safety standards?

I was troubled by the incident. Around 20 poor people died without any fault of theirs. It made me think that whether we have a statutory measure or body in place. What is the statutory authority for it. A commercial entity works in its own way, but do we have such a body? We work in the upstream, midstream and downstream. If there is an incident, there is no such system or accountability. I have issued instructions to the ministry that an oil and gas sector safety Bill will be taken to the cabinet. This should have been thought earlier. We will have a statutory overarching body; from upstream to touch zone point.

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