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Gas Price hike put on hold

Ending all speculation, the Election Commission on Monday told the Petroleum and Natural Gas Ministry to defer notification of the new gas price, which was to take effect from April 1. Any new decision will come only after the general elections. The new price for the domestically produced gas was to be almost double the existing $4.2/unit (gas is measured in million British thermal units).

In a letter to Petroleum Secretary Saurabh Chandra, the Election Commission said “taking into account all relevant facts, including the fact that the matter is sub judice in the Supreme Court, the Commission has decided that the proposal may be deferred.” The case in the Supreme Court relates to petitions against the Government’s decision to allow Reliance Industries to raise the gas price.

The new price had become a poll issue, with Opposition parties alleging collusion between the Government and a corporate house, Reliance Industries. Though the issue did not fall under the purview of the Model Code of Conduct, the Ministry played it safe and referred the matter to the Election Commission, as it did not want to be seen as favouring a corporate house. The prevailing gas prices of ONGC, Oil India, RIL and other joint ventures range from $4.2/unit to $5.73/unit, excluding marketing margins, transmission tariffs and local levies.

D6 price

However, the Ministry is in another difficult situation, as the price of gas being sold from the RIL-operated KG-D6 block is valid only till March 31. The Government has to communicate to the contractor at what price it can sell from April 1. Sources said that the contractors of the block, RIL, BP and Niko, could be asked to continue with the existing price of $4.2/unit (excluding marketing margins, transmission charges and other levies).

Bank guarantee

As for the bank guarantee that Reliance has to give the Government to sell at the new gas price (when implemented), the official said responses from the Law and Finance Ministries are yet to come. To get the new price, BP and Niko have also joined their Indian partner in its arbitration case with the Government. Reliance is disputing the Ministry’s decision to disallow some of the expenditure on the gas fields for producing less than what was proposed in the field development plan.

Source-On Request