There are two ways of observing the impact of the central government?s intervention in the dispute over the price of natural gas from the offshore Krishna Godavari basin. The first, and to me that seems the most salutary outcome, is the possibility of a quick resolution of the issue. Whether Reliance Industries Limited (RIL) owned by Mukesh Ambani sells gas at $2.34 per million British thermal units to Anil Ambani-owned Reliance Natural Resources Limited (RNRL) for 17 years, or is able to go in for a price of $4.20, set by the government, the full supply from the fields will be certainly switched on.

The other is more nebulous. The government has said it has the sovereign right over the natural gas extracted, whether by a private or a government entity. No doubt this is the correct position enunciated by the ministry of petroleum. This is possibly the first time the Centre has told a court of law the principle of sovereign ownership of any natural resource.

The implication of that position is, however, disturbing. The government has said no pact arrived at by any two private parties to use a resource can abrogate the sovereign?s right to use that commodity for national use. But that means the government is claiming it has the right to terminate a civil contract by using the plea of national need. This could be an uncomfortable line of reasoning on enforceability of contracts in the economy.

But the first issue is more immediate. It has been four years since June 2005, when the two brothers signed the MoU on gas.

RIL has the gas and RNRL needed the gas for its projects. What remained to be settled was the price at which it would be bought and sold.

For a moment let us look at the potential of the gas economy in India to realise the significance of the deal. The estimated demand for natural gas in 2007-08 was 179.17 mmscmd. Production of gas from the indigenous sources in the same year was around 88.63 mmscmd. The Krishna Godavari offshore gas field has added 40 mmscmd to the domestic tally and will take it up to 80 by 2011-12?just two years from now, as per data with the ministry of petroleum and natural gas.

So making the gas fully available has to be the first priority. The current usage of gas accounts for just 8% of the total energy mix of the economy, which is therefore heavily dependent on coal and hydel power. No wonder the Anil Ambani group, which has plans to set up 11 power plants, had inked the proposal to buy 28 mmscmd over 17 years.

Government data itself shows KG-D6 gas will be used to fire 11 power plants. As the production level rises, another 7 can be added to the queue. Gas supply to the 11 plants will in itself pour about 4,000 mw of additional power to the national grid. Currently all of them are running below capacity due to fuel shortage. Similarly the 20 mmcmd gas to the fertiliser industry will help produce 13 million tonne or 50% of the country?s fertiliser production. Convert that into rupees and the necessity of getting the project off the ground does not even need to be spelt out.

In the recent economic history of India, there would be no comparable case where the implications have been so dramatic. So it is most necessary to ensure that the developments quickly come to a denouement.

In this context the government needs to get the long overdue national gas pipeline grid up and running. Currently the only state with a developed capacity to utilise gas is Gujarat, which is why the KG-D6 gas travels all the way from Kakinada in Andhra Pradesh to Gujarat to find buyers. That has to change. Incidentally Andhra Pradesh is about the only state other than Gujarat that can harness the supply for projects like city transportation and piped gas. That needs to change, too.

A quick resolution of the gas dispute is in national interest.