Naidu pressure for subsidy on Ravva gas price

Vol 7, PW 5 (21 May 03) People & Policy

SOME PEOPLE just can't take 'no' for an answer.

Chandrababu Naidu, chief minister of Andhra Pradesh, considered one of India's most market-friendly chief ministers, is one such person. In April, Naidu stepped up his campaign against GAIL's decision to charge market rates for gas produced from the Ravva Satellite fields with a sharp letter to oil minister Ram Naik.

He complains: "All the concerns raised by me in my 5th March letter and also the discussions held on 21st March have not been addressed." Naidu insists that Ravva Satellite Gas should be subsidised like other gas from Ravva and studiously ignores Naik's elaborate explanation during a meeting on 21st March where he and ministry officials outlined why Ravva Satellite Gas is not eligible for subsidy even though it had been (mistakenly) subsidised since September 2001. "The above increase will have serious implications on the price of power in Andhra Pradesh," writes Naidu.

"This increase may bringpower sector reforms into disrepute by opponents of reform and will strengthen the view that the increase in power tariff has been precipitated by the reforms process." Electricity generation costs will rise by Rs61cr ($12.7m) a year for existing power stations and by Rs148cr ($30m) for four proposed gas-based power projects, argues Naidu. "The burden of this increase will lead to further increase in tariff in the state and one of the main features of the reforms programme is to provide quality power at competitive rates." Naidu is clearly oblivious to the laws of supply and demand: cheap quality power is possible only if there is enough gas.

Actual gas supply to Andhra is 8m cm/d, much below registered local demand of 16m cm/d.

LNG Summit