RIL will have super profits of Rs. 81,000 crore in five years, says the CPI MP

Communist Party of India MP Gurudas Dasgupta has urged Prime Minister Manmohan Singh to reconsider the decision of the Cabinet Committee on Economic Affairs to hike natural gas price from April 2014 to almost double and allow a debate in the public domain and among stakeholders to take place before it is implemented.

In a letter to the Prime Minister on Tuesday, Mr. Dasgupta claimed that due the proposed massive gas price hike from April 2014, the subsidy burden (both on PSU and RIL gas production) over a five year period would increase by Rs. 2,20,00 crore. For RIL production alone, an additional subsidy of Rs. 90,000 crore would be needed which implies that RIL would have super profits of the order of Rs. 81,000 crore over a five year period, he said. The cost of power will go up by Rs. 2 per unit and the fertilizer prices would increase by Rs. 6,000 per metric tonne, he added.

Stating that contradictory stand was being taken by the Petroleum and Natural Gas Minister Veerappa Moily and the Finance Minister P. Chidambaram on the decision and related issues, Mr. Dasgupta said it was Mr. Moily, who on June 27, 2013 after the CCEA meeting, had stated that the Cabinet had approved $8.4 per mmBtu as the new gas price. However, on July 12, 2013 he said there was no $8.4 per mmBtu price and we have gone with the Rangarajan formula. “It is a sad commentary on the UPA II government that Mr. Moily is making self-contradictory statements on an important issue. What is even more concerning is that these statements are not made out of ignorance but with a sinister design to confuse issues and attempt to mislead the public debate in the matter,” he states in the letter.

He said in the CCEA note of June 19, the Petroleum Ministry had indicated a gas price of $6.775 per mmBtu based on the Rangarajan formula. However, this was strongly contested by the Power Ministry which had stated that if the trends of prices of LNG are analysed, prices of Petronet LNG Limited’s Qatar RLNG are on the rise every month and is going to increase significantly after January 2014 as per the LNG pricing formula. Thus the projection of (Indian price average) PIAV of $6.77 per mmBtu is on a very conservative philosophy.

He said the statement by Mr. Moily that the prices could be more or less than the present day prices, which is around $6.8 per mmBtu, was completely misleading. The imports of PLL account for 85 per cent of the total imports. “We know that these prices are going to increase from the current average of $6.5 per mmBtu to level of $10.92 per mmBtu, in January 2014, as per the Qatar pricing formula. This will result in the PIAV to be $10.05 per mmBtu in April 2014, which would result in the final price of $ 8.42 per mmBtu,’’ he stated in the letter.

Mr. Dasgupta said while the views of the producers (RIL) have been considered, the impact on the consumers, the power sector and the fertilizer industry and eventually the common people, has been omitted. This is a huge abdication of responsibility by the Finance Ministry, he added.

Mr. Dasgupta due diligence has not been done regarding the implications of the huge subsidy requirement and a decision has been rushed through without considering the disastrous consequences for the country. “I would request you to reconsider the decision to raise prices of natural gas and keep it in abeyance until these issues are openly debated with all stakeholders,’’ the letter concludes.

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