The government plans to raise the price of natural gas produced by ONGC, Oil India and Reliance Industries to around $6-$7 per million British thermal unit (mBtu) from $4.2mBtu by the end of this month.
The move is aimed at spurring investments in the exploration and production sectors, finance minister P. Chidambaram said
“The papers are ready and they will come before the cabinet… Decisions will be taken taking the larger interest in mind,” Chidambaram said.
“It is important to revive investment,” he added.
“All views will be considered and the government will take a decision. My intention is that the government must decide on these matters,” Chidambaram said.
Sources said the oil ministry wanted the Rangarajan Committee’s recommendation to price domestic gas at an average of global hub prices and the cost of imported LNG, instead of the present mechanism of market discovery to be accepted by the cabinet with a minor modification. Read More
Former economic affairs secretary EAS Sarma has written to Prime Minister Manmohan Singh, asking him not to accept the Rangarajan committee’s report to review the existing gas price of $4.2/million British thermal units (mBtu), as this would result in a profit of $313 million for Reliance Industries Limited (RIL), without any additional investment or effort by the company.
“The letter says the unit cost of gas from the KG Basin may not exceed $0.6 per mBtu.
If the existing price of $4.2/mbtu, which in itself is questionable, were to be revised to, say, $10/mbtu, around the level resulting from the Rangarajan pricing formula, it would imply an increase of $5.80,” Sarma said in his letter.
“These profits would accrue without any additional investment or effort on the part of RIL. Over the lifetime of the gas field, the additional windfall profits will run into billions of dollars,” Sarma told Business Standard.
An RIL spokesperson said the company wasn’t aware of the letter and didn’t want to comment on the matter.
Sarma’s letter said natural gas markets were highly fragmented and there was no reliable price-discovery mechanism in place across the world. Depending on supply-demand fluctuations, gas prices varied and, therefore, any limited tender arrangement could be misleading, he said. Read More
Oil Ministry’s proposal for an across-the-board near doubling of natural gas prices has been rejected by the Cabinet Secretariat saying a ministerial panel headed by Defence Minister AK Antony did not have powers to do so.
The Ministry had sent a draft proposal for the consideration of the Empowered Group of Ministers (EGoM) to price all domestically produced natural gas — be of state-run ONGC or private sector Reliance Industries – as per the formula suggested by the Rangarajan Committee.
The Cabinet Secretariat returned proposal saying that the new pricing formula, which would have led to prices going up from current $4.2 per million British thermal unit to about $8, was not covered under the EGoM’s terms of reference. Read More
The Reserve Bank should give preference to the non-corporate sector for new bank licences, Prime Minister’s Economic Advisory Council ChairmanC Rangarajan said.
“It is possible for the Reserve Bank to start with initially non-corporate business and find out whether there are suitable applicants and thereafter proceed to look at the other applicants,” he said in an interview.
The RBI is in the process of finalising the guidelines for giving new bank licences after Parliament approved Banking Laws (Amendment) Bill last month.
The central bank, Rangarajan said, “should look at various types of financial institutions that are available currently and decide”.
“…. many of the strong private sector banks today have been at one time or other in the financial system. They can look at it first and look at the other later on,” he said. Read More
The Oil Ministry has withdrawn a note it had circulated to the members of a ministerial panel opposing hike in price of gas produced by Reliance Industries, as the Rangarajan Committee is examining pricing of the fuel.
In a surprise move, the Ministry had on October 10 moved a note to the Empowered Group of Ministers (EGoM) opposing a hike in price of RIL’s KG-D6 gas before April 2014 even though the company itself was not seeking a revision before that date.
“Yes, the note to EGoM has been withdrawn,” a top ministry official said.
This was done in view of panel headed by Prime Minister’s Economic Advisory Council Chairman C Rangarajan being asked to suggest “structure and elements of the guidelines for determining the basis or formula for the price of domestically produced gas, and for monitoring actual price fixation.” Read More