The Election Commission has refused to review its decision to defer the implementation of the new gas pricing regime based on the Rangarajan formula.
In a reply to the petroleum ministry’s request to review its earlier order of March 24, the commission told the ministry that it ?sees no merit in (the) request to review the decision,? sources told FE. This could mean the EC diktat would remain in force till the new government takes over, according to sources.
On May 1, the ministry wrote to the Election Commission, requesting it to review its order citing that the government needs to meet contractual obligations with the gas producers by announcing new gas price. Petroleum minister M Veerappa Moily said last week that once the Election Commission lifts its model code of conduct, its order for the deferment of a new gas pricing regime based on the Rangarajan formula will cease to exist and a price hike would come into effect.
It was then believed that the code of conduct will be lifted on May 12, the last day of polling.
But the EC’s new clarification, it seems the current government won’t be in a position to implement the guidelines notified earlier, and the decision on gas price would now be the new government’s.
?When the proposal came to me, I rightly ordered that after the model code of conduct is lifted, price may be announced for the July-September quarter, 2014, and also for the April-June quarter, 2014, as per the approved guidelines by the Cabinet Committee on Economic Affairs,? Moily said on May 2.
The gas sale purchase agreements (GSPA) between RIL (the seller of gas from KGD6) and buyers have expired on March 31.
Moody’s had projected a combined revenues of the upstream companies to rise by up to $2.8 billion had the price hike been implemented on April 1 as scheduled.
?We expected ONGC revenues to increase by $1.5-$2.0 billion; RIL’s by $300-$500 million and Oil India revenues to increase by $200-250 million in FY15. We estimate the upstream companies will lose about $10 million -$12 million of revenue for every billion cubic meters of gas produced each month the price hike is delayed,? Moody’s said in a recent report.
A new pricing regime based on Rangarajan formula was to be implemented from April 1 for all private and public sector natural gas producers under which rates were to rise around $8/mmBtu from current $4.2/mmBtu now. The decision to revise gas prices from April 1, 2014 was first taken in June 2013 and notified on January 10 this year.
