Andhra CM steps up campaign on gas pricing

Andhra Pradesh Chief Minister YS Rajasekhara Reddy is set to step up his campaign against a market determined pricing formula for natural gas in the wake of yesterday's discussions with Anil Ambani, chairman of the Anil Dhirubhai Ambani Group (ADAG).

Ambani gave a two-hour presentation to the chief minister, mainly focussing on natural gas issues.

The chief minister has decided to lead an all-party delegation to Prime Minister Manmohan Singh. Setting the agenda for his next Delhi trip, Reddy today addressed three letters to the prime minister on natural gas-related issues.

The state government has been consistently making its reservations public over a market determined pricing formula for the yet-to-be produced K-G basin gas.

The first letter sought the outright rejection of bids by Hyderabad-based GVK Power, Konaseema Power and three other companies, which were submitted by Reliance Industries to the petroleum ministry for finding a market discovered price for natural gas from the K-G basin.

In his second letter, Reddy urged the prime minister to adopt a pricing mechanism based on the return on investments and capital expenditure, besides pricing in Indian monetary terms.

He also reiterated his demand for the appointment of an independent and autonomous market regulator for upstream gas pricing while highlighting Andhra's interests in the third letter.

Ambani's Hyderabad visit is considered aimed at seeking the chief minister's support for the Centre not backing Reliance Industries' move on the issue.

RIL has approached the apex court against the Mumbai High Court's ruling, which went in favour of Anil Ambani, on the allocation of K-G basin gas. However, officials refused to comment in this regard.

It is reliably learnt that Ambani, during his presentation, suggested that a committee of chief ministers be formed by the Centre to decide on the pricing issues.

"The chief minister has not endorsed the idea as the state government has already made a set of requests, including that for the appointment of an independent regulator," a state official said.

The chief minister and Ambani held a meeting after the presentation session, which was attended by the chief secretary and other senior officials.

Unconfirmed reports also suggest that Ambani has proposed setting up a mega gas-based power project at Kakinada, offering power to the state at below Rs 2 per unit provided the gas price was kept under $3 per mBtu (million British thermal unit).