RIL, ONGC, BP, Cairn demand immediate hike in natural gas price

Energy giants led by Reliance Industries, ONGC, BP and Cairn India on Monday unanimously demanded an immediate hike in natural gas prices, saying current sub-market price of US $4.2 was impeding development of over a dozen discoveries.

As the government began consultations with stakeholders on raising gas prices, gas producers and consumers met a committee of secretaries (CoS) separately with their pleas on the issue. The panel, whose meeting was chaired by Power Secretary PK Sinha, gave a patient hearing to both sets and asked them to present their views in writing by August 28.

Expenditure Secretary Ratan P Watal skipped the meeting of the CoS to which Fertilizer Secretary Jugal Kishore Mohapatra is member and Rajive Kumar, Additional Secretary, Ministry of Petroleum and Natural Gas, is member secretary. Kumar said there will be another meeting of the panel this week.

According to sources, while gas producers said as many as 10 trillion cubic feet of gas could not be developed at current below market rate of US $4.2 per million British thermal unit, power generators said they could not afford a rate more than US $5 per unit.

Fertilizer makers too stated that doubling of rates, as had been approved by the previous UPA government before its implementation from April 1 was postponed first by the Election Commission and then by the new BJP-government till September-end, would lead to increase in subsidy.

While producers, who were invited separately, attended in full strength with the sole exception of Gujarat State Petroleum Corp (GSPC), consumer sectors were represented by their associations - Association of Power Producers and Fertilizer Association of India - besides some individual companies.

Sources said producers gave 35 minutes of their unanimous view to the committee, which throughout the session was mostly listening and offered neither counter suggestion nor argument.

Sinha suggested that the participants should send their written submission addressed to Oil Secretary Saurabh Chandra, who is not part of the committee, by Thursday morning.

The meeting was perfunctory with all operators in sync on issue of gas price except some vague remarks from state-owned Oil and Natural Gas Corp (ONGC) which acknowledged the fact that increase in gas price was required for both their existing production and new development but also mentioned that it was for the government to decide on a balanced rate.

Sources said producers reiterated that the sanctity of Production Sharing Contracts (PSC), which the government has entered into with them, should be maintained. The PSC provides for a market discovered gas price.

They also stated that the best option was the implementation of the 2006-07 recommendation of the Committee headed by PK Sinha, who was then Additional Secretary in the Oil Ministry, where it was stated that gas price should be discovered by asking consumers to bid.

Sinha as Power Secretary is now taking of protecting interest of consumers.