Panel for Gas Price Formula

“Report of the Committee on the Petroleum Sharing Contract Mechanism in Petroleum Industry” headed by Dr.  C.Rangarajan was submitted to the GOI in December, 2012.It suggested a formula for pricing the Natural Gas produced in the country, which industry experts believe gave the UPA government much wanted weapon to revise the price from $4.2/MMBTU to $8.4/MMBTU.

The formula suggested by Dr.Rangarajan lead to unprecedented debate among the industry experts. Many prominent experts questioned the very motive of such a ridiculous formula. The controversy on gas pricing formula led to filing two PILS in the Supreme Court and became hot political subject. It is generally believed that the formula and later on price fixation by the UPA government was orchestrated to benefit Reliance Industries at the cost of exchequer. In reality most experts believe that Reliance Industries should get no more than $2.34/MMBTU as per the contractual terms of PSC for KGD6 and increase from $2.34/MMBTU to $4.2/MMBTU was a fraud by UPA Government in 2007.

Despite the best efforts by the then Government, the gas price revision could not be implemented as Election Commission directed the Government to defer the decision in view of  model code of conduct due to the General Elections.

Realizing the controversy and the mood of the nation, the BJP Government under the leadership of Mr.Narendra Modi deferred the Gas Price revision by 3 months to review the Gas price Formula and related issues. A panel has now been appointed under the Chairmanship of Mr. Suresh Prabhu, former Power Minister and a prominent leader of Shiv Sena.

Appointment of Mr. Suresh Prabhu is based on the proposal of Ministry of Petroleum and Natural Gas to set up a panel of “a group of eminent persons” to assist the Government in formulating “an appropriate view”

There is no doubt that the proposal and idea is good. But the big question arises about the very selection of the Head of the panel. Is it as good as the panel headed by Dr.C.Rangarajan, selected by the UPA Government?

It is widely known that BJP got huge financial favors from Reliance for the campaigning in the General elections 2014.So far BJP has not come out clean about the election expenses and its funding. It will not be out of place to assume that this panel, headed by BJP /Shiv Sena politician is meant to give necessary ammunition to the Government to return the favors to Reliance. Is this panel a cover for another scam in the making?

We have some serious concerns.

·         How come BJP Government had to zero down on a politician with no expertise in Oil and Gas business?

·         What are the credentials of Mr.Suresh Prabhu to justify the appointment as Head of Gas Pricing Panel?

 Is he a man of impeccable integrity? Is he an expert in oil and gas business?

·         What are the criteria of MOP&NG of” eminent persons”?

·         Does MOP&NG believe that eminent, honest persons with integrity are available only among politicians and various panels should be headed by its crony?

·         Is gas pricing a political issue or techno-economic issue?

·         Could MOP&NG not get eminent independent experts with integrity from the industry?

·         Why MOP&NG is relying on DGH for technical support, when its credentials are already known in handling various issues relating to KGD6 as already highlighted by CAG in its reports on KGD6?

We suggest that:

 Group of apolitical eminent persons be asked to suggest the name of Head of the Panel and its members.

Alternatively,

GOI should await the decision of the Supreme Court as the matter is already under its considerations.