It may be presumed that Reliance will have to continue its supplies of gas, "on account basis", because, so far, no clear announcement has been made as to what would happen to pricing of natural gas

It took several months of negotiation. From a high production, the fall in gas supplies from Reliance Industries, has gone down to 10 msmcd, whereas, at once stage, it was in the 60s and hopes were high to reach the 80s! At the moment, it looks more like a geographical surprise than anything else, but our national plans have gone wary.

The revised price, announced by the Ministry of Petroleum, cannot be brought into effect from 1^st April, in line with the existing contract, due to the ensuing elections when millions will go to the polls from 7^th April. According to the announcement already made, polling will continue till the evening of 16th May, and the results will begin to hit the TV screens probably from 17/18^th May onwards. Details are expected.

Though Reliance has 50 agreements with its consumers, only 16 of them are "active" or "alive" as these relate to supply of gas to fertiliser units. Exact quantities of gas supplied to each of these unit is not readily available, but, whatever the quantity supplied is not adequate to meet the full demand.

The model of code of conduct, which comes into effect now, technically expires only on 16^th May as mentioned above. It may, therefore, be presumed that Reliance will have to continue its supplies of gas, "on account basis", because, so far, no clear announcement has been made as to what would happen after the "polling" is effectively completed on 16^th May.

Since a clear cut statement has not been made by the Ministry, both Reliance and the fertiliser industry are at a loss to know what to do, except hope, that in order to maintain supply continuity, Reliance will serve the cause of the national interest and supply the gas "on account basis", till official announcement is made by the new government.

It is difficult to conjecture as to who will be forming the government, and what will be their order of priorities for the jobs to be done, since portfolios have to be allocated and cabinet meetings have to take place before decisions of such national importance are made.

Meantime, it is reported that Reliance wants to have new negotiated agreements with buyers, calling them as "bridge agreement" which may have to be revised when final decision on price is taken! As far as the fertiliser industry is concerned, they want such agreements to be for a period of 5 years, instead of one year as suggested by Reliance, who has also maintained that the proposed agreement is "aligned" with the Rangarajan price formula based on which price changes every quarter!

Revision of price, every quarter, would not be practical in actual implementation and a simpler annual rate, perhaps, would be more realistic and workable.

The other major issue that has been raised is to follow the global practice of adhering to "gross caloric value" (GVC); if Reliance calculates on GVC, then the price may go up by a $1 per unit. This again, needs further clarification and approval by the ministry.

Moneylife has regularly covered on the gas supplies in the past; and it is now time that, when the new government takes over the administration, a detailed study is made and discussions are carried in depth with all the gas and oil producers to come to a consensus decision, so that there are no periodic pinpricks that come up and affect the people at large.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also 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.)