Power min seeks KG basin profit petroleum

NEW DELHI: The power ministry has the fertiliser ministry demanding the government’s share of profit from the gas finds in KG basin in kind. The power ministry, which will make a presentation at the committee of secretaries meeting on Friday, has asked the petroleum ministry to consider options of taking its profit petroleum — the government’s share of profits from an oil/gas field — as gas and not cash.

This gas could then be sold to the power and fertiliser sector at prices which are lower than market prices. This would ensure cheap power and lower fertiliser subsidies.

“We are demanding KG basin’s gas in kind to fuel power plants in the country,” an official in the power ministry told ET. It is understood that the issue will be raised in the Committee of secretaries (CoS) meeting on Friday that would take a decision regarding gas allocation and also approve RIL’s formula for gas price discovery.

Meanwhile, the petroleum ministry has said that the government had no role in fixing prices of natural gas produced from blocks auctioned under new exploration licensing policy (Nelp). It merely approves the pricing formula, an official said.

Even as the Prime Minister’s Office had said that the fertiliser sector should get priority in natural gas allocation, the power ministry is demanding its due in the KG basin gas. PMO had said that the power sector should be encouraged to rely more on coal for new capacities.

The CoS was constituted after ministries of power and fertiliser had expressed their reservation over RIL’s price of $4.33 per mBtu for KG basin gas. The RIL’s discovered price is, however, lower than the average price of $4.57 per mBtu being charged for 20.4 million standard cubic meters per day (MMSCMD) of gas being sold by other privately operated fields, an official said.

The Centre is also under pressure from the Andhra Pradesh chief minister YS Reddy, who is demanding a lion’s share in the gas, sources said. Mr Reddy has written several letters to Prime Minister Manmohan Singh on allocation of gas and also alleged that RIL’s price discovery of $4.33 per mBtu was very high compared to its move of selling the gas at $2.34 per mBtu to NTPC three years ago. But experts said that the price the gas was low due to international crude oil prices which was $35 dollars per barrel. Currently, the crude prices is hovering at around $69 per barrel.
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