Andhra Pradesh - Visakhapatnam   

State urged to amend gas production contracts

Staff Reporter

VISAKHAPATNAM: Deploring the attitude of Reliance Group of Companies in dictating terms to the State Government in the matter of pricing of natural gas from their offshore gas fields in the Krishna- Godavari Basin, the former Union Secretary (Expenditure) E.A.S. Sarma noted that any gas that was found onshore or offshore belonged to the people of India. It was held in trust by the government on behalf of the people and hence the Central Government was not the competent authority to dole out this precious resource to a private agency for making undue profit, under the guise of production-sharing contract or any other means, he pointed out.

Supporting Y.S. Rajashekara Reddy’s anguish over the issue, he was highly critical of the argument put forward by the Ministry of Petroleum that it has role in the matter of pricing of gas.

He pointed out that the world natural gas market is a highly fragmented. “Unlike in the case of crude oil and other petroleum products, there is nothing that could be called the ‘market price’ of gas at any given point of time. In such a scenario, it is strange that Reliance should be allowed to devise its own method of ‘discovering’ by calling for tenders in a highly restricted sellers’ market and directing the State Government to pay them on par with the highest bid price for the gas to be used in power generation and in transport and domestic sectors. This would put the State Government in double jeopardy of bearing the high cost of electricity generation from private IPPs who have deliberately bid a high price for Reliance gas and also paying on par with that high gas price for utilising the gas for supplies to domestic and other users.”

The latest Petroleum and Natural Gas Regulatory Board Act of 2006- clearly referred to the need to protect the interests of the consumers, he said.

Dr. Sarma opined that it would be difficult for all the three consuming sectors like power, transport and domestic sectors to bear any undue cost burden, arising out of the rent-seeking opportunity that is handed over by the Central Government to private players.

“It is now up to the Central Government to amend the production contracts in public interest and ensure that the consuming sectors are not forced to pay anything more than the actual cost of development within an economically justifiable margin of profit, on the lines permitted by the regulators of electricity.

The newly created Petroleum Regulator should also be empowered to deal with the pricing of crude oil and natural gas in all its dimensions,” he suggested.

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