Left Parties on Move to Increase Prices of Natural Gas

Joint statement issued by the Left Parties in view of the move of the government to increase the prices of Natural Gas from the KG-D6 Basin.

1.     The government is going to increase the prices of natural gas, which is a major input for the production of fertilizers and power, in the country. The present price of natural gas in $4.2 per mmbtu. The government appointed Rangarajan Committee has suggested a price of $8.4 per mmbtu from April 2014. While the power and fertilizer ministries are opposed to the recommendations of the Rangarajan committee and are pitching for a lower price, the Petroleum Ministry, Finance Ministry and Planning Commission are insisting on a price even greater than the Rangarajan formula. Though the increase in prices would be applicable to all producers, both PSUs and private companies, the super high profits of private companies will be retained by them, whereas, government can mop up the increased revenues of PSUs (and in theory at least, be used to offset the increase in subsidy).

2.     Petroleum Ministry has agreed to the Rangarajan prices for three years and has recommended a price of $14 per mmbtu (open market prices) for the last two years. Finance ministry has recommended a price of $11 per mmbtu and Planning Commission has recommended a price of $9.2 per mmbtu (on average) for three years and $14 per mmbtu (open market prices) for the last two years.

3.     Considering a production of 50 mmscmd from KG-D6 block, even with the Rangarajan formula, the subsidy implications are gigantic on account of natural gas produced from KG-D6 block. It would imply an additional subsidy of Rs.90,000 crore in the five year period (2014-15 to 2018-19) over the current levels of fertilizer and power subsidy. With the Petroleum, Finance or Planning Commission formula the figure would increase further to Rs.1,38,000 crore, Rs.1,46,000 crore, Rs.1,48,000 crore respectively.

4.     With its stretched finances, the government will not able to meet these subsidy requirements and will perforce raise the prices of fertilizers  and power. Even with the Rangarajan formula the unit cost of power will rise by Rs. 2 per unit. If the recommendations of Petroleum, Finance, Planning Commission were accepted, this would imply an average increase by Rs.3, Rs.3.2, R.3 .3 per unit respectively.

5.     Similarly with fertilizers the increase in prices with the Rangarajan formula would be Rs.6000 per metric tonne. If the recommendations of Petroleum, Finance, Planning Commission were accepted, this would imply an increase Rs. 9200, Rs.9700, Rs.9900 per tonne respectively.

6.     In the backdrop of the slowdown in the economy and persistent inflation this magnitude of price increase would deal a death blow to the Indian economy and cause untold hardship to the people of the country and its farmers. We demand that any price increase should  be kept in abeyance and the government should come out with full facts and figures and have debate with all stakeholders before it pushes ahead with this move,

7.     It should also be noted that the entire price increase/enhanced subsidy will be passed on to just a single corporate house as super normal profits, since the profit share of the private operator is 90%. Natural gas belongs to the people of the country and the government is holding it in trust for the people. They cannot be plundered by the corporates and actively be supported by the very arms of the government that are supposed regulate them.