Companies like state-run Oil and Natural Gas Corporation and Reliance Industries should be given freedom to fix natural gas prices that move in tandem with changes in international crude oil prices, Finance Commission Chairman Vijay Kelkar has said.
Delivering the inaugural lecture at the Rajiv Gandhi Institute of Petroleum Technology at Rae Bareli yesterday, he said government “should give freedom to producers to market their gas, provided the price determination is at arm’s length and on a transparent basis, which avoids transfer pricing or deliberate under pricing.”
“This would mean, inter alia, long-term prices to be linked to international crude oil prices, providing transparency like in our LNG contracts,” he said in his lecture titled ‘Towards A New Natural Gas Policy’.
Advocating further liberalisation of gas markets in the country, the former finance secretary called for improving the regulatory regime.
“In recent years, there have been instances of unilateral deviations from the stated policy and practices regarding the Production Sharing Contracts and this needs to be eschewed if we want to make any radical gains in finding new gas, which is indeed there to tap,” he said.
“Exploration and production of hydrocarbons is inherently hugely risky and such policy instability makes it even riskier thus discouraging the oil companies.”
Kelkar said he was mindful of the currently “high octane dispute” over natural gas from the Krishna-Godavari basin field between the Mukesh Ambani-led Reliance Industries and Anil Ambani Group’s Reliance Natural Resources Ltd.
“This dispute has now gone to the Supreme Court. I have therefore made all possible effort (in preparing this lecture) to observe the ‘Lakshman Rekha’.”
He cited the Australian regulatory model, which has very detailed provisions for pricing, production pipelines, operations, including the tariffs and safety, as also enforcement of competition policies, to curb potential abuse arising out of possible monopolistic power.
“With such incentives and regulatory approach, we will find that a number of oil companies will be forthcoming to invest in our gas sector, along with new technologies and improved oil field practices,” he said.
“To achieve such an outcome, I should re-emphasise the importance of having an upstream and gas regulatory agency which is fair, transparent and technically at par with the best oil companies of the world.”
