Hope coal de-nationalisation follows gas price hike: Kirit Parekh

In an interview with ET Now, Kirit Parekh, Expert, Oil & Gas, shares his views on the increase in gas prices. Excerpts:


ET Now: Are you excited that the government has finally approved increase in gas prices?

Kirit Parekh: Yes indeed. This is a right move and it gives an appropriate signal that gradual raising the price of diesel and this gas prices rationalization are very important steps in putting our energy economy on the right path. I wish if they would also go ahead with coal de-nationalisation and encourage many private companies and new technologies to come into coalmining so that our reliance on gas itself could go down and more coal power plants come up.

ET Now: But while the price hike may have finally happened, the question is will the consumer industries adjust to this new reality?

Kirit Parekh: I am sure that they will adjust. We are often forgetting that the people’s incomes are increasing, the general inflation rate is increasing and in that situation keeping down just the prices of, say, electricity or energy does not really make much sense. These prices have to move in tandem with other prices. So if you can keep down your inflation, if you can keep down all the price increases, one would say yes, these price increases are perhaps going to put an additional burden on people. But I do not think except for some consumers, this will really put an additional burden.

For example, electricity price would go up. Now if you recognise that gas is really appropriate for peak load management and then if you introduce peak load prices, then many of the poor consumers can really adjust their consumption pattern so that they have much less of a burden of these higher electricity prices if the price is differentiated by the time of the day when it is used. So we need to take a set of measures to make sure that these prices do not put an unnecessary large burden on some people, but for many consumers, this is an unavoidable hike and considering the kind of increases in income and inflation that has taken place, these to me seem unavoidable.

ET Now: Do you see more capex being committed now in this space when it comes to duos like Reliance, British Petroleum as well as ONGC?

Kirit Parekh: I do think that more capex would be committed because now there is at least an intention announced by the government to put the gas prices more or less on the competitive framework and I believe that $8.5 may be a good price and even a good long-term price because if the shale gas revolution that has taken place really goes on as one expected, then within a couple of years, the price of gas in the international market should be around this level of $8 or so on or even less.