Don’t delay gas evacuation

It is entirely in the national interest that the vexed issue of pricing natural gas from the Krishna-Godavari basin, now sub judice in the Bombay High Court, be resolved without delay. This is even more critical in the context of India���s somewhat worsening balance of payment situation and the precious foreign exchange it will save by urgently exploiting domestic gas reserves.

Specifically, what���s required is for the gas to start flowing to downstream industries and consumers as soon as possible. Note that gas was struck in the K-G basin by RIL early in the decade, there���s a huge demand-supply gap pan-India, and legal delays appear to have held up gas evacuation for several months now.

What���s required is for the court ���stay��� on gas sales to be lifted, so that fertiliser and power producers can procure much-needed fuel. Last year a GoM arrived at a price formula for determining gas linkage, and did fix the K-G gas wellhead price at $4.2 mBtu.

It can be taken as a benchmark. Two parties, RNRL and NTPC, seeking a total of 40 mmscmd of gas, have gone to court, claiming they have a prior contract with RIL to source gas at $2.3 mBtu. But pending a court decision, gas supplies need not be put on the backburner. In any case, the gas (as all mineral resources) belong to the government, and gas producers and buyers need to transact at the price okayed by the Centre.

The policy process needs to expedite gas supplies from the K-G basin, our biggest gas find in over three decades, if need be with the help of an ordinance if courts are unable to resolve the issue soon.

In tandem, what���s required is greater scope for price discovery in the domestic gas market. Years of sub-optimal investment and follow through has stultified gas availability. Fortunately, the new oil and gas exploration licensing policy, which specifically calls for competitive, market-determined pricing of output, seems to have encouraged investments in the sector.

So it makes no sense in policy terms to strike gas and then get into legal wrangles delaying actual gas delivery at a time when we can do with domestic substitutes for our growing energy imports.