 "Experts say govt must work for transparency on gas pricing")
Experts taking part in a panel discussion on the pricing of gas in the country this week have unanimously expressed that the government needs to be seen to be working for and ensuring complete transparency on the pricing mechanism applied.
Moderated by Press Club of India president Mr. Anand Sahay, the panelists taking part in the discussion, included Mr. Narendra Taneja, the head of the energy cell of the Bharatiya Janata Party; Mr. E.A.S. Sarma, former Secretary (Economic Affairs) and former Power Secretary; Ms. Soma Banerjee, the head of Energy at the Confederation of Indian Industry (CII) and Mr. Paranjoy Guha Thakurta, veteran journalist and one of the authors of the recently released book "Gas Wars: Crony Capitalism and the Ambanis".
The focus of the participating panelists was on the impact of the NDA Government's approval for the raising of the price of natural gas to $5.61 per million British thermal units (mmBtu) from November 1.
Commencing the discussion, Mr. Sahay said transparency and accountability was the need of the hour for the gas sector, and that it was felt that a regulator must be in place for this purpose. He said pricing should act as an incentive for those investing in the sector.
Mr. Taneja said the Narendra Modi-led Government's decision to hike natural gas prices should be welcomed as it would attract substantial new investment in the oil and gas sectors of the economy.
Advocating the use of proper regulatory methods, he further stated that from an energy security point of view, domestic private sector companies could start investing more not only in upstream, but also in midstream and downstream gas evacuation pipelines and allied infrastructure.
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Mr. Taneja said that in the past also he has been in favour of a hike in natural gas prices, as it would lead to a gas revolution in the country, and will encourage global majors like British Petroleum to invest more in the country.
He further stated that he favoured moves to incentivise, as there was no other alternative.
He said using appropriate mechanisms, the government of the day would need to manage, regulate and encourage the gas sector very carefully to prevent it from going the same way as the coal sector.
He reiterated that the focus must be on looking at the big picture in terms of ensuring energy security for the country.
Soma Banerjee expressed the view that a transparent market-determined regime on gas pricing needs to be in place for the country to maximize its energy security returns.
Currently, she said, there was absolutely no transparency, and by way of example, said that while Russia, the United States and Canada were gas surplus nations, India was not "floating" on gas, and needed gas to meet its energy requirements.
She also made a pitch for India knocking on the doors of Iran and Saudi Arabia to meet this requirement.
She asked, "Why are we not taking Iran into consideration? Why are we not taking advantage of the crude supplies available and on offer from Saudi Arabia?"
Being an importing country, she said, India is aware that there is no easy gas or oil available to it domestically, and therefore, there was a need to have a "reality check"; look at gas supply realistically, and consider moving away from the public-private partnership (PPP) model.
She also said the government would do well to consider streamlining subsidies, and ensures it is available only to deserving consumers.
Mr. Sarma, who is a petitioner in the Supreme Court against the Ministry of Petroleum and Natural Gas (PandNG), was of the view that markets by and large are still fragmented. He said natural gas "is a difficult animal, as there is no homogeneity; no link between its demand and its supply".
"We are not floating on gas, and as result for example, the economy in Andhra Pradesh is in shambles," Sarma said, adding that the domestic gas sector and the government needs to work for greater transparency, and "confine ourselves to the production sharing contract".
The former bureaucrat suggested that it is absolutely imperative for parties involved in a particular contract to read it right down to the fine print and enforce it, and punish those who don't abide by it. He said natural gas reserves belong to the nation.
Transparency, he said, would ensure improved gas price modification, better policies and a plugging of over invoicing of capital investment.
Mr. Guha Thakurta said his book covered all issues regarding the extraction of natural gas from the Krishna Godavari Basin, and added that when several publishers refused to accept the book in its unmodified version initially, he decided to self-publish it, choosing the internet as the primary mode of distribution to avoid facing litigation.
He said the book covers various important aspects of gas drilling in the Krishna Godavari Basin. It also covers the legal dispute between Mukesh Ambani and Anil Ambani over the pricing of gas supply between their two firms.
It also discusses technical issues of deep-sea drilling and includes an investigative report prepared by the Comptroller and Auditor General of India (CAG) of the alleged malpractices of Reliance Industries Ltd. (RIL).
He said the Indian political system has created crony capitalism, and claimed that in sectors like infrastructure and energy, a few firms are getting project deals in exchange for political contribution.
Referring to the CAG report, Mr. Guha Thakurta said the government prepared contracts that were favourable to RIL and that Prime Minister Manmohan Singh had changed Petroleum Ministers to favour the firm.
As far as the C. Rangaranjan-led committee's recommendations on gas pricing was concerned, he said that previous UPA regime was divided right down the middle, with four cabinet ministers in favour of raising prices, and four not in favour of doing so, and Prime Minister Manmohan Singh being most reluctant to take a firm policy decision on the issue.
Mr. Guha Thakurta said there is still a very high level of uncertainty about the formula to be adopted for gas pricing. He said that the Petroleum and Natural Gas Ministry declaring the Director General for Hydrocarbons as the sole regulatory authority was incorrect, as it is essentially a technical body. He insisted that a proper regulator must be appointed, as the current authority had no real powers to regulate.
Production-sharing contracts too needed to be impartial and in the overall interests of the parties concerned.
He said that lawyers for Reliance have sent legal notices, but are yet to go to court on the issues that they have raised.