Govt gifts RIL 3 times gas cost
Petroleum Minister Veerappa Moily has emerged as the most vocal proponent of the massive hike in price of natural gas, but just three weeks ago his Ministry submitted to the Standing Committee on Finance that the cost of production from the KG Basin was a mere $2.74 mmBtu (million metric British thermal units).
Despite such a low cost of production, the Government recently hiked natural gas price to $8.4 mmBtu, creating a situation where Mukesh Ambani’s Reliance Industries Ltd (RIL) will gain a huge profit. The price tag of $2.74 was communicated to the Parliamentary panel on August 2 by the Petroleum Ministry.
“The cost of production of RIL in KG-D6 block in 2011-12 was $2.48 mmBtu excluding levies and $2.74 mmBtu including levies. The figures are computed from financial statements of 2011-12, based on projected levels of production,” Petroleum Ministry told the panel. At present the purchase price of domestically produced natural gas is $4.2. The controversies erupted when in June the Cabinet Committee on Economic Affairs increased the purchasing price to $8.2.
Attaching the Petroleum Ministry’s admission of the actual cost of production from the KG Basin, veteran CPI leader Dasgupta in a letter urged Prime Minister Manmohan Singh to revisit the exorbitant pricing of natural gas. “We have been persistently raising the question of verifying the cost of production per unit in RIL’s KG Basin production of natural gas before deciding upon the process of pricing. No governmental agency has clarified this question to us. Even the Finance Secretary, while deposing before the Standing Committee on Finance, bluntly stated that evaluating the cost of production was not their job,” Dasgupta wrote.
He pointed out that nowhere did the Rangarajan Committee speak of the cost of production. "If the cost per unit is only $2.74, then how has the Rangarajan Committee come to the conclusion that $8.4 per unit should be given to the contractor? Evidently it is a case of lack of due diligence. The next question that arises is, how did the Cabinet approve the price that is almost four times the production cost, so hurriedly?" Dasgupta asked.
The CPI leader had already approached the Supreme Court and the notice was issued to the Government as well as Petroleum Minister Veerappa Moily on the gas pricing controversy. Dasgupta has been claiming that the price hike was aimed at providing a huge benefit to RIL. Dasgupta is sure to place the new revelation before the apex court on the next date of hearing in the first week of September.
"I fervently request you to revisit the question of pricing of natural gas to be given to RIL and clear the air of suspicion that the Government had only acted to benefit the corporate giant, undermining national interest," said Dasgupta.
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