- In the backdrop of a draft Cabinet note floated by the Petroleum Ministry to allow Reliance Industries Limited (RIL) to charge higher prices and furnish bank guarantee for the shortfall in the KG D6 gas production till it is verified by independent experts, the Finance Ministry has strongly pitched for putting a cap on the prices of natural gas, likely to come into effect from April 1, 2014, under the new pricing policy.
Issue with Gas pricing:
- The Finance Ministry has said that it was important to put a ceiling on the gas price to protect the interests of both the government and the consumers in case there is an unreasonable increase in the gas prices. On similar lines, the Fertilizer and Power Ministries had already warned that, this could lead to a much higher outgo of subsidy.
- The Cabinet had, in June, 2013 approved the Rangarajan formula for gas pricing to be made effective for five years from April, 2014, with a provision for a quarterly provision.
- The new formula has yet not been notified, as the Finance Ministry had wanted that RIL should be denied the higher gas prices from its existing fields because output had fallen far below what was committed in the approved development plan. Initially, the Petroleum Ministry agreed with the Finance Ministry’s opinion but then recently it has moved a revised note, suggesting that RIL be asked to give bank guarantee which can be encashed if it was proven that the company had hoarded gas by deliberately keeping output low.
- On the positive side, the ceiling would take care of the interest of the gas producers as a downswing in international market may adversely impact their financial fortunes and a ceiling would provide them a much desired stability.
No comments:
Post a Comment