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Need Some Flexible Pricing Mechanism if Gas Prices Rise: RG Rajan, RCF

  • ET Now: What do you make of the policy and would you be encouraged or enthused by whatever has come about to make fresh investments into urea capacity over the next 12 to 18 months?
  • RG Rajan: Yes, the policy which has been announced is good. However, we expect few improvements in the policy especially on the ceiling price and some more clarity on the gas pricing issue beyond $14 per mmBtu. Otherwise, we are quite keen to go ahead with the new investment.
  • ET Now: The fertiliser secretary mentioned that there is probably no lack of clarity on the pricing of gas beyond $14 per mmBtu. If the price of gas does go up, the urea players would be suitably compensated. While there is no clarity on what the suitable compensation would be, what is it that you would require? Would you rather hope for the pricing of urea be allowed to be flexible or would you hope for some cash compensation from the government should the gas prices increase?
  • RG Rajan: If the gas prices go up beyond $14 per mmBtu, some floor price should be suitably raised. That is what we are looking for right now.
  • ET Now: As the policy proposes that the government will pay for gas subsidy for up to about $14 per mmBtu. Do you think this is a fair price?
  • RG Rajan: If we get a combination of domestic gas and RLNG, it is a fair price.
  • ET Now: Do you expect that combination to be cleared?
  • RG Rajan: Yes because this sector has got the highest priority. Whatever new finds will be there in the future from Reliance, ONGC, GSPC, this sector will have the highest priority. So, we do expect some domestic gas to be accredited to the new plants. If there is some shortfall, it could be supplemented by RLNG. In this situation, the gas price should be below $14 per mmBtu.
  • ET Now: Are you are not concerned with the fact that there might not be enough gas available to supply in the first place?
  • RG Rajan: These plants will come up only after 3 years. By that time the situation will be quite different from today. This is because by that time ONGC will also start producing from the offshore. So, today the situation is that the production is declining but in the future we expect that more domestic gas will be available from other sources.

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