The government has spared no effort to convince the public that its gas pricing formula, skewed in favour of Reliance, will be the solution to India's energy needs
Politicians worldwide are dream merchants. They sell dreams. Indian politicians are, of course, second to none in this business and have indeed perfected this art form. Their success in selling pipe dreams is perhaps a measure of the depth of our despair as a nation. Can any Indian, my age, forget the euphoria that the dream of “Garibi Hatao” created in the 1970s? Some 40 plus years later, the same Congress party is telling the nation that 70 per cent of people now need food subsidy to survive. Of course, its minions in the Planning Commission are running out of newly sharpened pencils convincing the nation that poverty has reduced significantly. They see no contradiction between the claimed lowering of poverty and the proposed food security bill that has its foundation in the fact that 70 per cent of Indians cannot even buy sufficient food to survive today.
Veerappa Moily, an old Congress satrap, is a highly decorated warrior of many election battles. As an experienced dream merchant, he is selling the Rangarajan formula for pricing gas as the panacea to India’s energy security woes. No one has answered any of the direct questions that I have asked in my four articles in The Hindu since the Rangarajan Committee report surfaced. However, deceptive claims have kept appearing in the press about the wisdom of pricing natural gas as proposed by Dr. Rangarajan. And since no one was buying their arguments, the powers-that-be took out their most lethal weapon — the pen of the Honourable Minister himself to destroy non-believers like myself. Unfortunately, some of the statements in Mr. Moily’s op-ed of August 7, 2013 in the Times of India come straight out of a recent Annual Report of Reliance.
My issue is with our dream merchants and not with Reliance for it, like any private enterprise, responds efficiently and effectively to shape the prevailing environment and maximise profits. So let me cut short the song and dance and pose some straight questions to the Honourable Minister.
1. Can the Honourable Minister list the $100 billion that Indian companies have invested or committed to date for oil and gas assets overseas? The actual investment to date is under $25 billion and I honestly wish it was four times higher as claimed by the Honourable Minister. Although there are huge cans of worms under some of the overseas acquisitions we have made, the truth is that for every dollar invested overseas we have accrued more oil and gas reserves than for the same dollar invested in the Indian sedimentary basin. Large and serious global investors in oil and gas go where the prospects are the best. I am proud that despite a few questionable deals, the Indian public sector (primarily OVL) took the lead in this while the domestic private sector concentrated on India — an environment it could efficiently and effectively manage for much higher monetary gains (not resource accretion).
2. Can the Honourable Minister name any country in the world that offered investors from India or elsewhere a formula such as that proposed by the Rangarajan Committee or, for that matter, a formula such as the one currently in use in India to lure exploration and production investments in conventional natural gas or oil?
3. Despite the price reforms in Brazil and China cited by the Honourable Minister, do either of these countries or for that matter any country in the world provide the kind of guaranteed well head price for conventional natural gas that we have been paying under the current formula or promising to pay under the Rangarajan formula from April 2014? Can the Honourable Minister name a single well head in the world that is currently receiving $8.40/MMBTU or anywhere close to it for conventional natural gas?
4. The Honourable Minister gives several numbers about potentially higher domestic productions that could have been realised by end-2013 and by 2014-15 from KG-D6 and the likely savings in LNG imports. The Honourable Minster blames his own government for failure to give timely approvals to Reliance to achieve these outputs. The validity of these claims, especially the basis for estimating avoided LNG imports, remains in doubt but, more importantly, is the Honourable Minister trashing the various findings of the CAG and the Parliamentary Committee on KG-D6? Is the Honourable Minister trashing the findings of his predecessor and the reports of his own Ministry and the DGH?
5. The Honourable Minister promises an additional production of 40 MMSCMD of gas annually “starting” 2016-17 and savings of $65 billion in LNG imports. This outcome, the Honourable Minister informs, is the direct result of the changes he has instituted in the way his Ministry had been operating and the use of the Rangarajan formula for pricing conventional natural gas at the well head. Again, leaving aside the dubiousness of the estimated savings on LNG imports, let me ask the Honourable Minster if he can guarantee the promised additional output. Will this additional output come from the existing fields or new fields with new investments? Will the additional output result from RIL belatedly fulfilling its long unmet commitments under the addendum to the agreed initial development plan as detailed by the CAG? Finally, will this additional production come from acreage that should have been relinquished years ago as pointed out by the CAG?
In closing, the Honourable Minister lets fly a “conservative” pipe dream of 100 tcf of gas unlocking “$1 trillion in value” — never mind the details or the basis. At IIM-Ahmedabad, one of my very famous professors always said that a policymaker must have her/his head in the clouds but the feet must remain firmly on the ground. Since my infancy, my mother always told me that thieves have no feet. Neither that famous professor nor my illiterate mother is alive today for me to ask them if dream merchants with heads in the clouds too have no feet!
(The writer, formerly Principal Adviser, Power & Energy, Government of India, is Adjunct Professor, Lee Kuan Yew School of Public Policy, National University of Singapore)