National interest in fairer pricing

The cowboy capitalism that has over the past one and half decades characterised the oil and gas sector in India has seriously destabilised both the pricing mechanism and judicious allocation of this precious natural resource. Under the New Exploration Licensing Policy (NELP), when the then undivided Reliance Industries Limited (RIL) bagged the production sharing contract with union government in 2000, the finding of gas in the deep water D block of Krishna-Godavari basin was considered as the confirmation of the new era of divestment. The largest natural gas basin in the country, comprising over 7,645 square kilometers in area in Andhra Pradesh, however, soon fell prey to the profit-motive driven machinations of the largest private sector corporation in the country. If the 2011 CAG report on performance audit of hydrocarbon production sharing contracts of Reliance D6 gas business is anything to go by, the story has been one of severe underperformance, flouting of contractual commitments of production of gas, maximising of profits through unfair means and pushing policy decisions to raise prices through a high-handed manner. That the majority of corruption and tweaking of policy decisions happened during the ten years of UPA regime, with the country’s political class, policy fraternity, economists and media pretending that nothing is wrong and subverting public discourse only to drum up positive opinion in favour of the fuel price hike. 

It is in this regard that the former Aam Aadmi Party (AAP) government in Delhi dared to lodge an FIR against Mukesh Ambani and dragged former union oil ministry into the muck. That AAP leader Prashant Bhushan reiterated all the allegations on Sunday last is testimony to the party’s continuing allegiance to the common man. Bhushan’s statement that Reliance was allowed to retain the entire block area in KG-D6 gas field till as late as 2013, despite the fact that they had to relinquish 50 per cent of the fields by 2005 and a majority of the remaining fields by 2007 is crucial in deciding the future course of gas pricing in the country. Even though the prime minister is busy deliberating with the petroleum and finance ministers on revision of gas price from $ 4.2 to $8.4 per British thermal unit, ostensibly to meet the global market estimates according to the Rangarajan formula, he also needs to take cognizance of the fact the public sector unit ONGC had accused RIL of stealing gas worth Rs 30,000 crore from its adjacent reserve in KG-D6 basin. ONGC’s complaint must be factored in, along with the CAG report on RIL’s serial dysfunction and policy maneuvering, before arriving at a conclusion on the sensitive gas pricing issue. It must not be forgotten that natural gas is a public asset and even though private corporations have been granted licences to drill in these basins, they cannot be run solely on the basis of private profit maximisation. If the very objective of granting licences to private players is defeated and production targets remain unfulfilled, then perhaps the new dispensation at the centre needs to reconsider the arrangement between state-owned and private corporations as far as exploring precious fossil fuels is concerned.