Narendra Modi condemns gas price rise proposal

Vol 8, PW 18 (01 Dec 04) People & Policy

Ask Gujarat chief minister Narendra Modi why Chinese goods are more competitive than Indian products in the world market and hell tell you its because of cheaper power produced from low-priced domestic natural gas.

Modis analysis comes in comments included in a Note to cabinet on the Revision of Natural Gas Allocation and Prices prepared by the oil ministry on 3rd November and discussed by the cabinet on 24th November. Modi condemns a proposal in the cabinet note to increase the price of domestic natural gas from Rs2850 per thousand cubic metres to Rs3600 per thousand cubic metres for the power sector and Rs3200 per thousand cubic metres for the fertiliser sector.

Modi stresses that countries like China charge only a nominal price for locally produced gas enabling them to attract large investments to their industrial sector. He also condemns a proposal to link the price of domestic gas to the price that the country might have to pay if it is imported, as is done with locally produced crude from ONGC and Oil India.

This argument is not logical, writes Modi. Unlike crude oil, there is no international benchmarking of the gas price.

Modi wants ONGC and Oil India to be paid for their gas on a cost-plus basis. According to Modi, this is more logical because a large amount of indigenous gas is free gas and not associated gas that is produced along with crude oil.

Separately, Modi takes full credit for persuading state-owned GSPC to reduce the gas price to the power sector from $3.45 per thousand cubic feet to $3.11 per thousand cubic feet. He said any move to raise gas prices now when the economy is struggling to make a comeback, would be extremely detrimental, given the prevailing problems relating to power and scarcity situation.