Senior Communist Party of India (Marxist) leader and Rajya Sabha member, Tapan Sen has asked Prime Minister Manmohan Singh to reject the erroneous formula for domestic gas pricing recommended by the Rangarajan Committee urging it would sound the death knell of the fertilizer and power sectors.

In a letter to the Prime Minister, copy of which has been sent to the Petroleum and Natural Gas Minister, M. Veerappa Moily, Mr. Sen, who is also a member of Standing Committee on Petroleum and Natural Gas, said it is surprising that the recommended formula is based on a wide variety of gas prices ruling in US, Europe and Japan and the netback price for imported LNG for India without taking into account the actual cost incurred by the domestic players for discovering and evacuation of the gas which is available aplenty within our own country.

“It is once again an attempt to grant windfall profits to the players at the cost of domestic consumers as well as industries, the fertilizer and power industry in particular. If accepted, it would sound the death knell of the domestic fertilizer and power sectors,’’ Mr. Sen stated in his letter.

Mr. Sen said he had been time and again trying to impress upon the need to contain the deceptive design of the private contractor in the country’s gas field towards gold plating or manipulating the development cost of the gas fields with the sole purpose of increasing its share of return and also pushing up the price. The gas price allowed to the contractor by empowered group of Ministers (EGoM) on earlier occasion at $4.2 per million British thermal unit (MBTU) had itself been a bonanza to the contractor, if examined in terms of price of $2.4 offered by the Contractor itself to NTPC through an international competitive bidding.

“This was done despite the fact that a CoS set up to examine issues related to supply and pricing of gas during July 2007 categorically observed that a delivery price beyond $5 per million BTU would be prohibitive for fertilizer sector and beyond $2.34 per MBTU will be prohibitive for the power sector. Every increase of $1 per MBTU would involve additional subsidy of Rs. 2,300 crore. The government preferred to remain conspicuously indulgent to the pressure sought to be mounted on the government by the contractor to get premature price hike during 2012 by deliberately scaling down the production from KG D6 in blatant violation of production sharing contract and its own field development plan,’’ Mr. Sen charged.

The Rajya Sabha member said unfortunately now all these activities by the contractor, instead of being tackled by strong corrective intervention by the government in national interest, will get a stamp of approval once the pricing formula stipulated in the Rangarajan Committee report is accepted by the government.

“I do not know whether such a formula has been given the go ahead by either the Fertilizer Minister or the Power Ministry. The formula suggested is sure to enhance enormously the domestic price of domestically produced natural gas by $4 to 4.5 MBTU which will push the production cost of fertilizer especially urea as well as power to an unbearable level causing tremendous damage to the already strained agricultural sector of the country,’’ he added.

“I would once again like to impress upon the government in general and your kind self in particular to protect the national interest and desist from accepting such an erroneous formula which will destroy the domestic urea and power industry. I reiterate, that the price of natural gas produced in the country should be formulated on cost plus reasonable return basis in the interest of the nation,’’ Mr. Sen concluded.