New Delhi: Amidst a row over his ministry's proposal to raise natural gas prices, Oil Minister M Veerappa Moily on Wednesday said the revision in rates was a contractual requirement which will help remove policy uncertainty and spur investments that have almost dried up.
With domestic and international companies as well as the government's technical advisor DGH finding the current rate of USD 4.2 uneconomical to produce gas from deep-sea fields, Moily has proposed to price all domestic gas at a uniform rate suggested by a panel headed by Prime Minister's economic advisor C Rangarajan.
"Investors want to know the direction we are going in before they can plan investments. If we shrink our responsibility, no investment will come," Moily told the agency in an interview here.
India has vast resources that can help cut USD 160 billion oil import bill but without the right pricing and policy regime, resources will remain trapped inside earth, he said.
He has proposed raising prices to at least USD 6.775 per million British thermal unit for both PSU companies like ONGC as well as private firms like RIL.
Asked about the move being seen by CPI leader Gurudas Gupta as favouring RIL, he said, "I as Law Minister ensured that natural resources like gas are declared as sovereign right of the nation. This battle was fought against Reliance and they say I am supporting Reliance."
Stating that price revision was a contractual requirement, Moily said while the new pricing will apply to state-owned firms this year, RIL will get the new rates only when its revision is due in April next year.
"We are modifying the Rangarajan committee suggestion. We are not even giving what has been recommended. We are giving little less than than that and that too has to be considered by the Cabinet Committee on Economic Affairs (CCEA)," he said.
DGH has rejected as economically unviable proposal of companies like RIL for developing gas fields at USD 4.2 per per million British thermal unit.
"Gas pricing is an issue. Investors don't want to invest unless we tell them the path we are going to follow," he said, adding Rangarajan panel suggested pricing will be valid till end of 12th Plan and thereafter a market driven regime to be recommended by a separate committee will come in play.
He said his Ministry has lowered the price that Rangarajan committee had suggested in the interim to market pricing. All domestic gas, conventional and unconventional, is proposed to be priced on a quarterly average of international hub price and actual cost of imported LNG, which currently comes to USD 6.775.
Moily said the opposition to gas price revision those who want India's oil import bill should not come down. "I don't think any patriotic person will agree to this. We have to live with vagaries of international prices for how long," he said.
"Uncertainty and ambiguity are the biggest a dampener for the investors," Moily said.
The Rangarajan panel wanted the prices to be changed every month and it would have been over USD 8 this month.
Moily said a note will go to the Cabinet Committee on Economic Affairs (CCEA) once Finance Ministry sends its comments on the proposal.
Oil ministry wants Rangarajan Committee recommendation of pricing domestically produced natural gas at an average of international hub prices and cost of imported LNG instead of present mechanism of market discovery be accepted with a minor modification.
Instead of Rangarajan panel's suggestion of calculating gas price every month, the Ministry has proposed notifying the gas price on a quarterly basis. The gas price based on average of April-June rates would come to USD 6.775 per mmBtu, much less than USD 8.8 per mmBtu suggested by the panel.
In absence of pricing clarity, the government has not been able to launch the 10th exploration round.
Moily said India has vast resources which cannot be exploited under current pricing regime.
His Ministry's CCEA note was a few days back returned by the Prime Minister's Office.
The Ministry had in March moved a draft proposal for the consideration of an Empowered Group of Ministers (EGoM) headed by Defence Minister A K Antony for revising prices of gas produced by state-owned firms as well as private sector RIL as per the formula suggested by the Rangarajan Committee.
The Cabinet Secretariat returned that proposal saying the new pricing formula, which would have led to prices going up from current USD 4.2 per mmBtu to about USD 8.8, was not covered under the EGoM's terms of reference.
The Ministry then moved the same proposal for consideration of the CCEA with minor modifications.
However, the Prime Minister's Office (PMO) sent back the note saying views of the concerned ministries on the changes made since circulation of the EGoM note, need to be sought.
Sources said the Ministry had not sought comments from any of the concerned ministries on the CCEA note that had modified the earlier proposal so that the immediate gas price increase came to USD 6.775 per mmBtu.
In the CCEA note it had attached the comments that ministries like Finance, Power and Fertiliser had given on the EGoM note.
The Ministry, he said, has now asked the ministries of Finance, Power, Fertiliser, Law, Heavy Industries, Steel and Department of Chemicals and Petrochemicals to give their comments on the changes made.
Once the comments are received, the Ministry will incorporate them in the CCEA note and move a revised one as soon as possible.
Its proposal for raising gas price for state-run firms immediately and that for RIL from April 2014 will not be diluted, sources said.