On Gas Pricing

Tuesday, September 4, 2007

Press Statement

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement:
On Gas Pricing

The Polit Bureau of the CPI(M) calls upon the government not to allow an unfair price for the gas produced from the Krishna Godavari basin. The Reliance Industries Ltd., has proposed US $ 4.33 per MMBTU which is designed to ensure windfall profits for the private contractor for exploiting natural resources of the country.

The present price formulation made by RIL in 2007 is in no way consistent with the price of US$2.34 quoted by the same RIL in 2004 for supplying gas from the same KG Basin in 2004 to NTPC through a international competitive bidding. Even if the price quoted in 2004 through competitive bidding is indexed to the present, it can no way allow an 85% hike as the RIL has done while fixing the price at US$ 4.33 mmbtu. The RIL proposition on gas price is thus an artificially inflated one and should be rejected.

Moreover, the RIL formulation for gas price is based on the linkage with the international price of crude oil and not with the cost of producing gas that is wholly a domestic product. Our Party has been consistently taking a stand against such import-parity proposition in respect of indigenously produced petroleum products. There is absolutely no justification for such linkage which is being made only to find a route to artificially inflate the price.

Allowing the private contractor to fix the gas price at such a high level would severely affect the viability of the industries like power and fertilizers who want to switch over to gas as a cheaper and cleaner fuel and it will also affect the common people in a big way. Gas being a natural resource and a national property as well, It should not be left to market forces for determining prices.
The Polit Bureau strongly urges the Empowered Group of Ministers constituted to look into the pricing of domestically produced gas and the UPA government to decide on a price that is based on actual production costs plus reasonable profit.