Pricing to be based on Rangarajan formula, says Veerappa Moily

The much-touted offer of $8.4 mbtu price for natural gas, which had generated heat and debate, was given a decent burial on Thursday, when Petroleum Minister M. Veerappa Moily announced that no such rate had been fixed or approved by the Cabinet Committee on Economic Affairs (CCEA). He said the price levels under the Rangarajan formula in April 2014 would be applicable to domestically produced gas.

His assertion comes in the backdrop of the Union Finance Ministry raising questions about various issues pertaining to gas pricing, including the applicability of $4.2 mbtu to gas from the KG D6 field of Reliance Industries Limited (RIL) after it overcomes technical difficulties so as to restore its asset back to full production for fulfilling its commitment to the nation.

The Hindu was the first to report, on July 6, that there was nothing like $8.4 mbtu for gas approved by the CCEA, and whatever price worked out in April 2014 would be based on the Rangarajan formula.

Mr. Moily indicated that his Ministry was in no mood to rethink the issue of giving an $4.2 mbtu price for the gas produced by RIL from KG D6 after it achieved full production. “I must make it clear that irrespective of any party or contractor, from April 2014, new gas price will prevail across the board, and there is [a] way the Ministry will go with dual pricing. The CCEA price will apply to all parties uniformly. There is also no proposal [with the Petroleum Ministry] for capping of gas price.”

He told reporters that there was no reconsideration of the CCEA’s decision. “Let me make it very clear. There is no confusion, there is no vagueness. And I don’t think there is scope for any interpretation whatsoever. We have gone with the Rangarajan formula. The price in April 2014 could be more than what is prevalent today or even less than that. It all depends on the prices in the international markets under the approved formula,” he said.

Virtually rejecting the July 4 note of the Finance Ministry, Mr. Moily said it had only forwarded some media reports, and the note had no directive. “It is just a piece of information for us, and it cannot be termed queries being made by the Ministry.”

“The Office Memorandum dated July 4, from the Department of Expenditure, Ministry of Finance, has enclosed two editorials of newspapers and illustrated some of the issues [raised] in these editorials. That cannot be taken as an objective opinion of the Ministry of Finance. It cannot also be considered as [a] query by the Ministry of Finance.” Asked on how many occasions the Ministry had written such a note based on a newspaper editorial, Mr. Moily said he had nothing to say.

Expressing surprise at the note, Mr. Moily said his Ministry had taken its opinion twice, and it was incorporated into the CCEA note. “The Finance Ministry, in comments, did not raise any issue of capping price or RIL being asked to sell gas at the old rate. I don’t think there is another interpretation open to it. The CCEA’s decision has been taken after due deliberation, … once a considered view has been taken, we will stick to that.”