Oil ministry justifies KG gas price rise

Ministry justified its decision contending that 45 to 50% of gas deposits were in high seas and required huge investments

The Ministry of Petroleum and Natural Gas today reiterated before the Supreme Court that the price increase relating to the KG basin gas was necessary to attract investments and it was a bonafide decision based on expert opinion. It was not to benefit Reliance Industries alone.

Counsel L. Nageswara Rao concluded his arguments in the public interest petitions moved by CPI leader Gurudas Dasgupta and Common Cause against the proposed steep increase in the gas price. Presently the hike has been stayed following an Election Commission directive.

The bench headed by Justice B S Chauhan was hearing the government for two weeks and Reliance counsel Harish Salve is likely to reply to the allegations of Dasgupta and Common Cause next week.

The ministry justified its decision contending that 45 to 50% of the gas deposits were in the high seas and required huge investments. The success rate of discovery was only 25% to 40%. If the price was not revised, the country will be paying double the price for imports.

He therefore justified the profit sharing contract with Reliance Industries Counsel further emphasized that it was all a matter of policy and it was part of an overall decision related to new licensing and exploration policy (NLEP) contracts. Therefore, the court should not interfere in the policy decision, which was taken by the government with the help of experts in the field.

The government's stand is that the country was self-sufficient in natural gas till 2004. Then it started importing gas from Qatar. In 2011, India became the largest importer of LNG worldwide, with power and fertiliser being the biggest consumers.

The price mechanism was changed from an administered price mechanism in which price was fixed at costs plus a return on investment to one in which price was set by the market.

The change-over was suggested by the Rangarajan committee. This decision was taken under the exigencies of the circumstances and there was no mala fide intention in it, as alleged by the CPI leader, government counsel said.