'Desperate' Veerappa Moily wants higher natural gas price for Reliance Industries from April

Written by Amitav Ranjan | New Delhi | Updated: Apr 30 2014, 17:59pm hrs
RIL gasVeerappa Moily?s pitch for higher price to RIL gas comes after his officials informed the company that the new price would only be applicable from July 1.
Less than a month before demitting office as petroleum minister, M Veerappa Moily made a desperate attempt to ensure that Reliance Industries (RIL) does not lose out on getting higher price for natural gas that it sells during April-June 2014.

Moilys pitch for higher price to RIL gas comes after his officials informed the company that the new price to gas producers would only be applicable from July 1, 2014.

As per the notified guidelines, the earliest possible date for applying the revised prices is 1st July 2014. Till that time, the contractor should charge price as mentioned in the order dated 28th March, 2014, the ministry wrote to RIL on April 21. A day later, Moily wrote on file that he had reconsidered the matter and that the new higher price should be available to gas producers, including RIL, from April 1, 2014, and not from July 1, 2014, as it was the ministrys fault for not notifying the new piece well in advance of the announcement of the Lok Sabha elections on March 5.

It was expected that the ministry would notify the price well in advance and if the same was done, the model code of conduct would not have come in the way, Moily argued. Under the Rangarajan formula, approved by the Cabinet Committee on Economic Affairs (CCEA) last June, gas prices would have doubled from current $4.2 per million British thermal units from April 1, 2014. But its notification, slated for March 7, got delayed and the issue was referred to the Election Commission which deferred the notification until the end of model code of conduct on May 18.

The EC order is to defer the proposal to notify natural gas price which should have no bearing on the decision of the CCEA to give effect the revised guidelines from 1st April 2014. In the given situation, the ministry may be right in notifying the price applicable from 1st July 2014 for July-September 2014 after the model code of conduct is lifted, Moily wrote on April 22.

However, the revised price effective 1st April, 2014, for April-June 2014 quarter will have to be notified on the basis of the approved guidelines after the model code of conduct is lifted. Not doing so will be in contravention of the decisions of the CCEA, he added. The ministry officials have countered Moily saying that paragraph 1.8 of the Domestic Natural Gas Pricing Guidelines, 2014, provides that the advance notification of revised prices every quarter was a rider to the implementation of the new pricing guidelines.

As per para 1.8 of these guidelines, it is a pre-requisite for the implementation of the NGPG 2014 that the revised price are notified in advance every quarter. Without such notification, guidelines shall not come into force. That is the correct position as per the decision of the CCEA, they argued in writing.