The Hindu : Business : Paswan joins issue on RIL gas pricing

Online edition of India's National Newspaper
Friday, Sep 07, 2007
ePaper

Business

Business

Paswan joins issue on RIL gas pricing

Special Correspondent

NEW DELHI: After the CPI(M) Politburo, it is now the turn of Fertiliser Minister Ram Vilas Paswan to join issue on the Reliance gas pricing row.

Echoing similar arguments as the Left party, Mr. Paswan viewed that the $4.33 per million British thermal unit (mbtu) price sought by Reliance Industries Ltd. (RIL) for the gas from its Krishna-Godavari (KG) basin was ‘unreasonable’ as it was not based on the cost of production.

In a letter to External Affairs Minister Pranab Mukherjee, who is chairing the Empowered Group of Ministers (EGoM) on the RIL gas pricing issue, Mr. Paswan said: “The price [of natural gas] should have some relationship with the cost of production with a reasonable profit to the contractor.”

Limited bidding

To start with, the Fertiliser Minister found fault with the limited bidding undertaken by Reliance as it was not a “transparent” process to arrive at the gas pricing formula. “The formula has been devised by the contractor himself, the basis of which is not very clear. First of all, the basis of this formula, its reasonableness etc. will have to be looked into,” he said. Making out a case for the supply of cheaper gas as fuel for fertiliser units, Mr Paswan noted that the RIL formula was unreasonable as the bidding was restricted to ten selected parties and they were asked to quote a very small component of the overall formula that contained both rupee and dollar components. This made the gas price susceptible to variations in the rupee-dollar exchange rate, he said. “The restricted bidding is against the principle of ‘arms length’ price discovery,” he stated.

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section