With recent declines in oil prices, subsidy concerns have eased for FY14. Bharat Petroleum thinks that the government will keep allowing the monthly diesel price hike, and did not seem much concerned about no diesel price hike this month, said Nomura in its note on the company
In order to maintain and support agriculture, it is imperative that gas is made available to this industry, thus reducing its subsidy for urea. However, such a move will correspondingly affect other consumers such as power generators, which will have a rippling effect on industry and trade. So, the question is how, when, why and who will finally decide the price structure for the gas?
Only a couple of weeks ago, Reliance Industries (RIL) announced the discovery of gas in a new find in an area identified as MJ1 in the D-6 block, where exploratory activities started some eight weeks ago, after a 15-month lull.
Further tests are underway but it is generally believed, on the initial assessment, that MJ1 may hold significant amount of gas. It has been further reported, as mentioned in these very columns of Moneylife that should all the four satellite fields discovered in D-6 area go on stream, Reliance can produce an estimated 30 million metric standard cubic metres per day (mmscmd) additionally. () No doubt, this increased production will bring a great relief to the power-starved country.
Naturally, these procedures will take a few months to achieve a production commencement status, after commercial viability tests are proved to be positive.
However, new contracts for gas supplies to commence from 1 April 2014 are to be finalized in terms of price, quantity and delivery. The domestic gas is currently priced at $4.2 per million metric British thermal unit (mmBtu).
The Rangarajan Committee had called for freeing of gas pricing which would have pegged it between $8 and $8.50 per mmBtu. To start with, this is double of what is being charged today.
Unfortunately, however, for RIL, the finance ministry does not see eye to eye with the Rangarajan Committee’s recommendations. It has, in fact, rejected the pricing formula proposed by the Committee and has instead suggested an alternative formula based on wellhead prices, charged by suppliers from Oman, Qatar, Abu Dhabi and Malaysia for long-term contracts. Wellhead prices do not take into account the transportation costs, which are substantial.
Currently, the international price for gas is $12.5 per mmBtu as against what Reliance charges at $4.2 per mmBtu.
It may be recalled, recently, apparently after the gas discovery in D-6 and to ensure that a ‘fair’ price is fixed for the new contracts from April 2014, both Mukesh Ambani and Bob Dudley of BP, had called on the prime minister, deputy chairman of the Planning Commission, Montek Singh Ahluwalia and the petroleum secretary to impress upon them the urgent need to fix realistic prices.
The fertilizer industry is also up in arms, demanding its right to have full access to gas produced in the country. In fact, India has not made any new investment in this sector for establishing new units or for expanding the existing ones because of non-availability of guaranteed supplies of the feeder stock.
India's requirement of urea is around 30 million tonnes, out of which, 8 million tonnes are imported every year, with the last year's import cost @ Rs24,564 per tonne. Based on the mix of both imported and domestic gas, the cost of production of urea is Rs11,000 per tonne with the government subsidizing supplies to farmers by Rs5,640 per tonne. Why can’t the government review the issue of fertilizer subsidy and let the market conditions dictate the price level? Farmers do not pay taxes and profits are made by the intermediaries on which there is very little control?
Based on the present production capacity, our urea industry requires 7 mmscmd of gas. The fertilizer industry has demanded that indigenous gas be supplied rather than being forced to depend upon the use of more expensive method of LNG imports.
The government has a difficult choice to make. In order to maintain and support agriculture, it is imperative that gas is made available to this industry, thus reducing its subsidy for urea. Such a move will correspondingly affect other consumers, such as power generators, which will have a rippling effect on industry and trade.
So, the question is how, when, why and who will finally decide the price structure for the gas that may be available for supplies from April 2014 onwards? If it is purely based on domestic supplies only, and not taking into account any international gas price formula, it will establish a precedent on self-pricing policy based on local conditions. Also, it is incorrect to price it on well-head because, transportation costs are unavoidable.
Since gas will be supplied mostly through pipelines, a cost effective method has to be devised. Why not ask the fertilizer industry to join and form a consortium of sorts with the producer, pipe producer, layer (contractor) to an agreed hub point that may be nominated by Reliance (or another gas explorer like ONGC/Cairn) and amortise the expense involved?
National progress is more important than the individual corporate body making substantial profits? The final price should be in line with the replacement cost of the gas, which includes transportation and landing expenses that the importer would incur, if indigenous gas was not available?
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Delhi Jal Board assured the CIC that water tankers would deliver water near electric poles or temples, mosques or community centres in Delhi instead of parking the tanker near anyone's home. This is the 82nd in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC) disposed a complaint after assurance from the Public Information Officer (PIO) of Delhi Jal Board that the public authority would henceforth distribute water by parking their tankers at public places instead of parking it in front of any person's home.
While giving this judgement on 25 September 2009, Shailesh Gandhi, the then Central Information Commissioner said, “...the main issue was Delhi Jal Board sending tankers in some places next to the houses of particular people who are then appropriating the right to take water for themselves.”
New Delhi resident Yashpal Rawat, on 15 June 2009, sought information under the Right to Information (RTI) Act from the Public Information Officer (PIO) of Delhi Jal Board. Here is the information he sought and the reply provided by the PIO...
1. Details of work of Sanjay Ram, JE for which he was being paid by DJB.
PIO's Reply:. Sanjay Singh was being paid for the work. He did not do any kind of politics.
2. Details of working hours of the above said employee on the Karala Water Tank and details of amount paid to him as salary.
PIO's Reply: Mr. Sanjay Singh was working on the Karala water tank according to the responsibilities. His monthly salary was Rs23,877.
3. Details of action taken on the complaints which the appellant had given to the said employee.
PIO's Reply: The appellant could draw water from near Pole No3 in Gali no3 of Pratap Vihar Part - II as the water tanker goes to that site.
Not satisfied with the PIO's reply, Rawat filed his first appeal. In his order, the First Appellate Authority (FAA) said that the dispute was regarding location where the tankers deliver water in the area which was 50-60 feet away from the house of the appellant. The FAA further stated that water was already being delivered at a point near the appellant's house so no further action was necessary. The FAA clarified that logistically it was not possible to deliver water at the doorstep of each person.
Rawat, still not satisfied with the reply of FAA, then approached the Commission with his second appeal.
During the hearing, Mr Gandhi, the then CIC, noted that the main issues in the present case was that the Delhi Jal Board was sending tankers in some places next to the houses of particular people who are then appropriating the right to take water for themselves.
The PIO acknowledged this issue and told the Commission the they will ensure that tankers would deliver water near electric poles or temples, mosques or community centres in that area instead of parking the tanker near anyone's home. The PIO also assured Rawat that by 15 October 2009, all water tankers would deliver water at such places.
After the assurance, the Commission then dismissed the appeal stating that the PIO had provided the information sought under the RTI application.
CENTRAL INFORMATION COMMISSION
Decision No. CIC/SG/A/2009/001875/4878
Appeal No. CIC/SG/A/2009/001875
Appellant : Yashpal Rawat
Delhi - 110086
Respondent : Lalit Mohan
Public Information Officer
Delhi Jal Board
O/o the Chief Engineer (West)
Karol Bagh, New Delhi - 110005.