OilMin Wants to Consult Finance & Law Ministries on Gas Price Revision
LEGAL TROUBLE Move follows RIL’s arbitration move against govt
The petroleum ministry wants to consult the finance and law ministries before taking a decision on revising natural gas prices, official sources said.
The petroleum ministry wants to consult the law ministry as Reliance Industries has legally challenged the government by initiating arbitration over delay in the announcement of new gas prices. The previous government had approved a new formula that would have doubled gas prices from April 1 but the Election Commission blocked the move.
“It’s a legal issue. We need to take views of the law ministry regarding the impact of price announcement on the arbitration proceeding,” one official said.
RIL initiated arbitration on May 10 saying that planned investment of about $4 billion this year could be finalised only after clarity on gas prices. The old price was approved for five years that ended on March 31 this year. The new rate was approved twice by the Cabinet last year. Energy issues are high on the list of priorities of the new government. Petroleum minister Dharmendra Pradhan is said to have met Prime Minister Narendra Modi on Friday to discuss various issues in the sector but details on the likely discussion was not known. Officials said another reason for seeking inter-ministerial consultation is that the previous government’s Cabinet had decided that the price of natural gas for every quarter should be announced well in advance, leaving doubts about implementing new rates retrospectively from April 1.
“We need fresh Cabinet approval for having missed the deadline for fixing gas price for the April-June quarter. Retrospective pricing would also require the government to correspondingly raise the fertiliser subsidy for April-June quarter,” another official said.
Third reason is related to the manner in which heat value in the new price formula is to be calculated. RIL has demanded that new rates should be calculated on the basis of gross calorific value (GCV) because all inputs of the approved Rangarajan formula is on GCV basis.
However, all domestic gas is priced on the basis of net calorific value (NCV), which is about 10% lower. Consumers, such as fertiliser companies want clarity on this.