People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 27

July 07, 2013




‘Keep Gas Price Hike in Abeyance;

Discuss in Parliament’


Below is the full text of the letter written by Tapan Sen, MP and general secretary of CITU, to prime minister Dr Manmohan Singh on July 2, 2013 protesting the doubling of price of domestically produced natural gas. Terming it as against the interest of the country, Sen demanded that the issue be discussed thoroughly in both Houses of parliament. He marked a copy to the chairman of Standing Committee on Petroleum & Natural Gas for information and urgent intervention.


IT is quite disturbing that overruling the objections put forward from almost all quarters of the consumers community, and also by many of your cabinet colleagues as reported by the media, and host of economists, industries in the fertiliser and power sector, including the concerned ministries, political parties, trade unions, farmers organizations in the country, the union government has taken the decision to double the price of domestically produced natural gas by accepting the completely biased new formula suggested by the Rangarajan panel. Thus all the illegitimate activities and deceptive designs of the private contractors in the countrys gas field by way of deliberately inflating the cost on the one hand and scaling down production on the other to pressurise the government for a price-hike have got a stamp of tacit approval from the government itself which should have instead been tackled through strong corrective intervention by the government in national interest.


I like to reiterate again that from the very beginning, the government has been pursuing a biased, rather an indulgent policy in favour of the contractors handling the natural as well as national resources like oil and natural gas. The government had already allowed a much higher price for natural gas produced in KG basin when the EGoM decided to fix the same at $4.2 per unit in December 2008 (as per RILs formulae) completely ignoring the bid of the same Reliance Industries Ltd in the international tender to supply gas to NTPC for 17 years at $2.34 per unit and also ignoring the objections raised by the fertliser and power ministry and the opinion expressed by the Committee of Secretaries. I have been consistently drawing your attention for corrective intervention right from the time the private contractors started lobbying in the corridors of power, particularly since 2007 onwards vide my letters to you dated 11.06.2007, 04.07.2007, 13.07.2007 etc and thereafter my letters to you dated 19-06-2009, 31-07-2009, 14-10-2009, 11-12-2009, 16-01-2012, 7-02-2012, 21-03-2012 31-03-2012, 16-05-2012, 28-02-2013 and 25-05-2013.


Kindly recall, in my letter to you dated 28-02-2013, it was pointed out that, It is surprising that the recommended formula (by Rangarajan committee) is based on a wide variety of gas prices ruling in USA, Europe & Japan and the netback price for imported LNG for India without taking into account the actual cost incurred by the domestic players for discovering and evacuation of the gas which is available aplenty within our own country. It is once again an attempt to grant windfall profits to the players at the cost of domestic consumers as well as industries, the fertiliser and power industry in particular.


This uncalled-for decision is sure to push up the price we pay for everything from food items to public transport. It shall have a cascading impact on increasing prices and burdening common people, while the main benefit will accrue to a couple of corporate houses operating or seeking to operate as contractor in natural gas exploration and production. It is regretted that a government claiming to work for the aam admi has factually caused an annual net transfer of tens of thousand of crores from the pockets of the consumers to the chosen contractor in the gas fields of the country.


It is really surprising that the price of domestically produced natural gas is being determined without any linkage/reference to its production/exploration cost on Indian soil. This hike is quite irrational even in comparison to gas exporting countries and there is no reason why the price of domestically produced natural gas should not be formulated on cost-plus reasonable return basis. There is not even a single gas field in the world that gets a well-head price of $8.4 per mmbtu of conventional dry gas.  It is again a practical joke to claim that the hike in domestically produced natural gas price will yield higher upstream investment in untapped hydrocarbon field. The pricing of petroleum product on import parity basis being practiced since long have not succeeded in raising domestic crude oil production to any notable extent or attract significant FDI in Indian sedimentary basin. Can such mechanism to guarantee such enormous profit for the current producers at the cost of common man and honest tax-payers be justified?  Why is the government that concerned to dole out windfall profits to the corporate houses when the CPSUs in the upstream petroleum sector in the country are having quite a big amount of investable surplus which can be gainfully utilised if invested in the exploration/production of natural gas.


A significant natural resource like natural gas cannot arbitrarily be handed over for super profits to corporates and this decision which is detrimental to the interest of our country should be kept in abeyance. I demand a thorough discussion on the issue in both the houses of the parliament.