Reject EGOM Recommendation on Gas Pricing

Thursday, September 13, 2007

Press Statement

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

Reject EGOM Recommendation on Gas Pricing

Inspite of serious objections raised in and outside Parliament as well as the opposition from the Power and Fertilizer Ministries, the Empowered Group of Ministers (EGOM) has reportedly permitted RIL to fix a highly inflated Gas price of 4.2 dollar/unit from KG Basin, which is a token reduction from the original price of 4.33 dollar/unit claimed by the company. Such a high price would severely affect the viability of the consumer industries like power and fertilizer which in turn would hit the common man specially the farming community because of escalation in cost of power and fertilizer.

RIL formulation for gas price agreed by EGOM is based on the linkage with international price of crude oil and not with the actual cost of producing gas in the country. There is absolutely no justification for such linkage which is being made only to find a route to artificially inflate the price for windfall gain of the private company.

We reiterate that the gas price should be based on the actual cost of production and reasonable profit on the same. The pricing can not be left to the so called market forces based on import parity only to encourage super profit to the investors, who have been given contract under Production Sharing Contract (PSC). By virtue of Article 297 of the Constitution of India, Petroleum in its natural state is vested in the Union of India. Obviously, RIL is just a contractor selling Gas, owned by Union of India. Article 39 (b) of the Constitution directs the State that the ownership and control of material resource of the community are so distributed as based to sub-serve the common good. The inflated gas price is not sub-serving the common good because of the arbitrary nature of pricing and its adverse impact on price of power and fertilizer.

Shockingly the Government has also weakened the genuine case of the Government-owned unit, NTPC, which is fighting a legal battle in the High Court of Mumbai against RIL, which was obligated to supply gas from KG Basin at rational price of 2.34 dollar/unit as per International Competitive Bidding in 2004.
The recommendation of the EGOM, should be rejected in public interest.