Natural gas has become increasingly important as a cleaner and more viable alternative fuel over the last decade. Especially as India grapples with volatility in the world crude market, on which it depends for more than 70% of its crude requirement.
Our natural gas production has risen from being negligible at Independence to around 87 million standard cubic meters per day (MMSCMD), as per the petroleum and natural gas ministry (MoPNG). But this domestic supply is expected to rise sharply as Reliance Industries Limited (RIL) production from the Krishna Godavari Basin (K-G basin) gets into full swing. It?s largely on this basis the petroleum and natural gas working group for the Eleventh Five-Year Plan has projected that domestic supply will go up to 202 MMSCMD by 2011-12.
The KG-D6 block, a giant deep water block in the basin, was awarded to RIL under the new exploration and licensing policy. RIL holds 90% participating interest and the Canadian company Niko Resources holds the rest. RIL, which is run by Mukesh Ambani, began pumping gas from this block this April.
The fierce courtroom battle between RIL, Reliance Natural Resources Limited (RNRL) and the government (especially the MoPNG intervention on the question of discriminatory pricing and terms of access to KG basin gas) has confined the bigger question of energy security to a very narrow domain. It has revolved around the sanctity of a private MoU for gas sharing. Still, this murky battle has finally brought up a significant issue: can a resource of national importance be traded away in the first instance? Or does there need to be accountability to the people, who are intended to be its ultimate beneficiaries?
Let?s establish how crucial the KG basin gas availability is to India?s economic growth in general and energy security in particular. Increased availability will reduce our dependence on petroleum, with far-reaching implications for India?s foreign exchange reserves and fiscal deficit. Its beneficiaries will include the fertiliser companies who will be able to substitute high priced naphtha with cheaper natural gas, thus creating an avenue for pruning government subsidies. Power companies will be able to implement expansion plans or improve existing plants? capacity utilisation. Gas transmission and distribution companies will be able to pursue city gas distribution projects more effectively, augmenting energy efficiency and reducing dependence on LPG. The latter is of course still in the subsidised domain, marked by phenomenal wastage due to inappropriate allocation and inefficient distribution. Finally, the KG-basin supply will help small and medium enterprises convert from diesel-based power generating plants to gas-based ones, pruning power costs considerably.
Given all these factors, it?s really surprising that the government took such a long time to raise the sovereign rights concern. Actually, its Supreme Court petition may well lead to contract termination, which will cost both RIL and RNRL heavily and have wide ranging implications for the economy and the energy sector. The petroleum minister has told Parliament that the government is innocent of any delays. But surely the objection that it has raised now could have been expressed at the very onset, when the private MoU was being drafted. Even if the ministry was kept in the dark when the MoU was being drafted, it still cannot disclaim the duty of scrutinising such agreements.
The government is now claiming the RIL-RNRL power sharing contract is ?surreptitious and unauthorised?. But, whatever the final verdict, the government should never have allowed the country?s energy security to be dragged into a court-room battle. This has set a terrible precedent for the executive?s accountability to the nation?s people.
The author is senior fellow, Asian Institute of Transport Development