Jubilant opposes oil ministry guidelines for gas pricing

Vol 10, PW 12 (05 Oct 06) People & Policy

Private sector Delhi-based Jubilant Oil and Gas is firmly opposed to the oil ministrys ongoing exercise to draw up guidelines for a formula to price gas governed by PSCs signed under NELP.

On 26th September, an oil ministry panel headed by Joint Secretary and Financial Adviser PK Sinha heard presentations by Reliance Industries, Reliance Energy, Tata Power and the Indian Chemical Manufacturers Association on formulation of transparent guidelines for approving gas price formula for giving government approval under the PSCs. But in a note to the ministry, seen by this report, Jubilant points out that the NELP contracts already provide for free market rights at market-determined prices.

Adds Jubilant: In our opinion, the provisions under the PSC are adequate to address the issue of pricing as it leaves the price determination to market forces. Jubilant believes the gas market in India is at a nascent stage and we need to give it all the freedom to grow in line with market forces.

If the government suspects that any particular gas sale or purchase transaction is non-transparent, such transactions may be handled on a case-to-case basis, said Jubilant. According to Jubilant to control the pricing would be counter-productive.

Any effort to link the prices with an index or combination of indices would have the adverse effect on gas sales and consumption in different regions. Jubilant highlights the wide disparity in gas prices across the country, ranging from $8 per mmbtu in Gujarat to $4.5 in the Cauvery region to $3 in the northeast.

These prices have evolved in direct relation to the market conditions and we have no reasons to believe that a uniform price linked to some indices would benefit the market.

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