Govt. sticks to Rangarajan formula for gas pricing - The Hindu

The Hindu Oil Minister M. Veerappa Moily addresses the media in New Delhi on Thursday. Photo: Shanker Chakravarty The much touted $8.4 per million metric British thermal unit price for natural gas, which had generated a lot of heat and debate, was given a decent burial on Thursday with Petroleum Minister Veerappa Moily announcing that no such number had been fixed or approved by the Cabinet Committee on Economic Affairs (CCEA) and the price levels worked out under the Rangarajan formula during April 2014 will be applicable for domestically produced gas. The assertion by Mr. Moily on the pricing of natural gas comes in the backdrop of the Finance Ministry raising questions over various issues pertaining to gas pricing including applicability of $4.2 mmBtu for KG-D6 gas of Reliance Industries Limited (RIL) after it overcomes technical difficulties and restores its asset back to full production to fulfil the commitment on gas production made to the nation. The Hindu was the first to report on July 6 that there is nothing as $8.4 mmBtu price for gas approved by the CCEA and whatever price works out in April 2014 will be based on the Rangarajan formula. Mr. Moily also indicated that his Ministry was not in a mood to rethink on the issue of giving $4.2 mmBtu price on the gas produced by RIL from the KG-D6 asset after it attains full production. "I must make it clear that irrespective of any party or contractor, from April 2014 new gas price will prevail across the board and there is way the Ministry will go with dual pricing. The CCEA price will apply to all parties uniformly. There is also no proposal for capping of gas price with the Petroleum Ministry," he added. Mr. Moily told reporters that there was no 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. We have gone with the Rangarajan formula. The price in April 2014 could be more than what is prevalent today or even less than that. It all depends on the prices in the international markets under the approved formula," he remarked. Virtually rejecting the July 4 note of the Finance Ministry, based on the June 29 edit of The Hindu, Mr. Moily said the Ministry of Finance had only forwarded some media reports and there is no direction involved in it. It is just a price of information for us and it cannot be termed as queries being made by the Ministry. "The Office Memorandum dated July 4 from the Department of Expenditure, Ministry of Finance has enclosed two editorials of newspapers and illustrated some of the issues in these editorials. That cannot be taken as objective opinion of Ministry of Finance. It cannot also be considered as query by Ministry of Finance," he stated. Asked on how many occasions in the past had the Finance Ministry written such a note based on an edit of a newspaper, Mr. Moily said he had nothing to say on this issue. Virtually expressing surprise at the queries of the Finance Ministry, Mr. Moily said his Ministry had taken opinion of Finance Ministry twice and it was incorporated in the CCEA note. "Finance Ministry in comments did not raise any issue of capping price or RIL being asked to sell gas at old rate. I don't think there is another interpretation open to it. The CCEA decision has been done after due deliberation and I think it has taken lot of time and deliberations and once considered view has been taken, we will stick to that," he stated. The Ministry of Finance in its July 4 note had conveyed to the Petroleum Ministry that once RIL overcomes the `technical difficulty' of producing gas at the KG-D6 field, the government must ensure the company delivers the shortfall it still owes at the old price of $4.2 rather than getting the benefit of the new price. But for first year of production, KG-D6 production was short of target since 2010-11 fiscal. Against the target of 62.1 million standard cubic metres per day in 2010-11, RIL produced 55.89 mmscmd. For 2011-12, it produced 42.65 mmscmd as opposed to a target of 70.38 mmscmd. Last fiscal, gas production of 27 mmscmd was way short of target of 86.73 mmscmd. Currently, it is producing 14.01 mmscmd as opposed to a target of over 86 mmscmd. RELATED NEWS RIL must get lower gas price till shortfall is delivered: FinMin A very reliable formula Of Reliance, by Reliance, for Reliance Centre softens stand on gas price More In: Industry | Business | News | National via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNGdmsozyihwCOXFgq5ywLx-SUKPog&url=http://www.thehindu.com/business/Industry/govt-sticks-to-rangarajan-formula-for-gas-pricing/article4905258.ece

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