Govt examining EC order to defer doubling of gas prices

EC had yesterday asked the government to defer notifying doubling of price of the fuel produced by companies such as Reliance Industries till general elections are completed.

PTI| Updated: Mar 25, 2014, 17:28 PM IST

Bangalore/New Delhi: A day after the Election Commission asked the government to delay the doubling of natural gas prices until the completion of elections, Oil Minister M Veerappa Moily said top law officers will examine the order before the next course of action is decided.

"We are examining it. And because the matter is also in the Supreme Court of India, we would like our Solicitor General or Attorney General to examine it. I don't want to comment further on the issue," he told the agency in Bangalore Tuesday.

Deferring the new price regime by a few months will not have a material bearing on 85 percent of the gas produced in the country. Firms such as ONGC will continue to sell gas at USD 4.2 per million British thermal units (mmBtu).

However, the government will have to decide on the gas produced from Reliance Industries' eastern offshore KG-D6 fields. The firm's sales contracts expire at the end of the month and it was looking at renewing supplies to customers including fertiliser plants at the new rates.

Moily said delaying the rate hike will have implications on the investment climate and on subsidy as production will be hit in the absence of remunerative prices.

"Unless there is production, there is no gas. If there is no gas, (we will have to) import at more than USD 15 to 18 (per mmBtu). That means to say - we have to live with that kind of an import and there will be higher prices. That means the subsidy will go up," he said.

An Oil Ministry official in New Delhi said a directive could be issued to RIL to sell gas on existing terms to government-identified customers until further orders.

"The matter is sub judice and so we would like to see what the Supreme Court decides (on the issue)," he said.

The apex court today resumed hearing a petition by CPI leader Gurudas Dasgupta and an NGO challenging the proposed rate hike from April 1.

"Government lawyers have already mentioned about the EC directive in the court. We will now submit to the court on the terms (price) RIL can continue supplying gas beyond March 31. We will wait for what the court says," the official said.

In New Delhi, RIL Executive Director PMS Prasad met Oil Secretary Saurabh Chandra, apparently to discuss the post-EC directive scenario.

The EC order will directly affect only RIL, which produces less than 15 percent of domestic gas, as its current sales contracts will have to be extended.

RIL is allowed to sell gas from KG-D6 only to customers identified by the government. It supplies 12-13 million standard cubic meters of gas a day to 16 fertiliser units under contracts that expire on March 31.

"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 had written to the Oil Secretary.

Moily said the government on January 10 notified the formula for pricing gas from the financial year starting April 1 and only the specific rate had to be declared.

The government, he said, had taken the decision to revise gas prices last year, based on the Rangarajan Committee recommendations, after following due process and diligence.

After the EC's decision, the UPA government is left with no option but to leave the implementation of the Rangarajan pricing formula, which would have hiked gas prices to about USD 8.3 per mmBtu, to the new government.

The formula had been criticised in several quarters, including user industries such as fertiliser and power, for incorporating the cost of importing gas (LNG) in determining rates for domestically produced gas.

The decision to hike gas prices, which was keenly sought by RIL and its partner BP plc of UK, was opposed by the Aam Aadmi Party, which alleged that it was taken to favour the Mukesh Ambani firm.

AAP leader Arvind Kejriwal, during his brief stint as Delhi Chief Minister, had ordered an FIR against Moily, RIL head Ambani and others for allegedly conspiring to double gas prices and asked the EC not to approve the revision.