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In probably one of the few sensible moves in the recent past, the petroleum ministry is planning allotment of shale gas blocks to public sector companies in the initial stages. A Business Standard report quoting a senior official says that rights will be given to state run companies only in order to help prove the potential of shale gas.
One question arises why not restrict shale gas exploration and production to public sector companies only. It might sound like going back to the era where public sector companies had rights over public assets, but recent experiences and the doctrine of greater good towards its people tilts the balance against private sector companies.
In the recently announced gas pricing policy, government has clarified it stands on the natural resources front. For the first time in the world, a government is making people pay for resources that belong to them at import parity prices. The policy is clearly in favour of private sector companies as the incremental profit earned by a public sector company will be taken back from them by way of dividends and taxes.
Shale Gas has the potential of being a game changer for the country. There is however, no clear idea on how much shale gas the country has. The official quoted in the story claims that the country has reserves of 12-15 trillion cubic feet (tcf). According to US Energy Information Administration, in 2011, India’s shale gas reserves stood at 63 tcf, which is 20 times that of Reliance’s gas reserves. But India’s National Geophysical Research Institute in Hyderabad has identified 28 sedimentary basin with shale gas resources several times higher than US agency estimates. Doesn’t it smell fishy and gives excuses for future allocations?
Shale Gas production in the US has been cited as one of the factors revival of the economy. In India it has the potential of substituting imported oil and correcting the current account and fiscal deficit and making the country self-reliant.
But, as had been the case with oil and gas, public sector companies are being made the scapegoat to do the hard work of exploration and get a fix on the resources. The sector will then be opened to the private sector who will be involved in the relatively easier and much less riskier (financial risk) job of production.
It makes no sense to privatise the sector and buy back gas at a higher price from the private companies. And when the same gas is supplied to public sector utilities, using tax payer money to subsidise them. We have seen in the case of gas how the private sector along with the government has managed to completely change what was earlier agreed upon. Why privatize and give them an opportunity again.
If the greater good is to provide utilities for the aam aadmi and the industry at low cost, selling shale gas at four times of international prices and that too in dollars (which is the case in gas as per the new pricing norm) would cripple the country further.
