Finance ministry against higher gas price to RIL

NEW DELHI: The finance ministry has backed a plan to cap gas prices from Reliance Industries-run Krishana Godavari fields till the company clears “past dues” , setting the stage for the Union Cabinet to amend its earlier decision to double prices from all fields to $8.4 a unit from April. Senior officers told TOI that North Block supported the move by the oil ministry last week after discussing the issue internally for several days. In government circles, the change in stance is being seen as a last-ditch effort to avoid further controversy after the Manmohan Singh government faced flak as it was accused of providing windfall gains to gas producers.

On its part, the government argued that hike, based on prices in global hubs, was necessary in the wake of an increase in international prices. The government has been accused of letting RIL get away without supplying the promised quantity of gas from the KG-D 6 blocks. Gas output from the two main fields has declined around 80% to 10 million standard cubic metres per day, instead of rising to the planned 80 million standard cubic metres per day.

The oil ministry had piloted the proposal for an across-the-board increase in gas price, arguing that it will boost investment in the sector, and help India overcome shortage. Other ministries such as finance had played ball. Only power and fertilizer ministries dealing with gas consumers opposed the move.

The Cabinet decision, however, had come in for severe criticism, prompting the finance ministry to forward newspaper editorials and seeking oil ministry comments, which then moved a Cabinet note suggesting a cap on price for RIL. Initially, the oil ministry had opposed any changes in the Cabinet-approved pricing policy arguing that the scheme should be simple to administer. But now, various options are being discussed, including the option of keeping KG-D 6 outside the ambit of the notification.