The Telegraph
Wednesday , March 26 , 2014
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Key to gas chamber with court
Legal experts to vet order

Veerappa Moily

New Delhi, March 25: Oil minister M. Veerappa Moily today said top law officers would examine the Election Commission’s order to defer a gas price hike even as the government sought a Supreme Court directive on the price Reliance Industries (RIL) should charge to supply gas from its Krishna-Godavari (KG) basin blocks beyond March 31, when its existing contract comes to an end.

In Bangalore, Moily said, “We are examining it (the order). And because the matter is also in the Supreme Court of India, we would like our Solicitor General or Attorney General to examine it. I don’t want to comment further on the issue.”

A senior oil ministry official in Delhi said to ensure uninterrupted supplies to fertiliser and power plants from Reliance’s KG basin blocks, a directive could be issued to the Mukesh Ambani company to sell gas on existing terms to government-identified customers until further orders.

“Government lawyers have already mentioned about the Election Commission directive in the court. We will now submit to the court on the terms (price) RIL can continue supplying gas beyond March 31. We will wait for what the court says,” the official said.

The Election Commission yesterday asked the government to delay the doubling of natural gas prices until the Lok Sabha polls are over.

The Centre, on its part, today gave an undertaking in the Supreme Court that it would not increase the prices of gas in view of the model code of conduct before the elections.

Additional solicitor-general L. Nageshwar Rao today told a bench headed by Justice B.S. Chauhan that the oil ministry cannot “give effect” to the notification (on price hike) because of the freeze ordered by the Election Commission on Monday.

Hearing on the public interest litigations started today in the apex court.

Impact meter

Deferring the new price regime by a few months will not have a material bearing on 85 per cent of the gas produced in the country. Companies such as ONGC will continue to sell gas at $4.2 per million British thermal units (mBtu).

However, RIL’s sales contracts for gas from the eastern offshore KG-D6 fields expire in March and it was planning to renew supplies to customers, including fertiliser plants, at the new rates. It supplies 12-13 million standard cubic metres of gas a day to 16 fertiliser units

Moily feels delaying the price hike will also have implications on the investment climate and on the subsidy burden as production will be hit in the absence of good prices.

“Unless there is production, there is no gas. If there is no gas, (we will have to) import at more than $15 to 18 (per mmBtu). So we have to live with that kind of an import and there will be higher prices. The subsidy burden will go up,” he said.

An empowered committee headed by then finance minister Pranab Mukherjee had fixed the price of gas at $4.20 per mBtu in August 2007 for five years from the time KG-D6 began production. The Reliance gas field started commercial production in April 2009 and the old price was supposed to remain effective till the end of March 2014.

RIL executive director P.M.S. Prasad met oil secretary Saurabh Chandra to apparently discuss the post-EC directive scenario. RIL can sell gas from KG-D6 fields only to customers identified by the Centre.