Crowding out investment

BS OPINION

 Some days ago, for instance, the Group of Ministers chose not to attack the huge subsidy (of around Rs 8,000 crore each year) given to fertiliser and power plants which buy natural gas from the state-owned ONGC at less than half the free-market price, as an increase in gas prices would have led to a huge surge in fertiliser and electricity prices.

 But the impact on ONGC apart (its profits would go up 80 per cent if it was allowed to charge market prices in line with a government decision of September 1997), it is important to note what it would do to the huge investments of close to Rs 10,000 crore planned in the LNG sector by not just several private sector firms, but even the state-owned Petronet LNG.

 While, thanks to the huge subsidy, ONGC