Wednesday, June 25, 2014

Cabinet defers decision on gas production price, agrees in principle to Chinese constructing industrial parks, ups minimum support price for kharif crops

New Delhi: The cabinet committee on economic affairs has on Wednesday has almost rejected the Domestic Natural Gas Pricing Guidelines by deferring it for three months and indicating a fresh round of “extensive consultations” with all the stakeholders, while accepting in toto the recommendations of Agriculture Cost and Prices Commission (ACPC). It has also given in principle approval to a Memorandum of Understanding (MoU) with China on building industrial parks.

All three decisions are important. Gas pricing is a very crucial issue with Reliance Industries of Mukesh Ambani which is operating the Krishna-Godavari Basin, and which has been demanding an upward revision of the production price on the plea that the costs have gone up. The guidelines prepared by the natural gas and petroleum ministry said that the price of the production of natural gas, including imports as well domestic production should be based on the average price of production in the world hubs. The prices are to be fixed based on the preceding four quarters on a quarterly basis. The average global price as the criterion for determining the domestic gas production price was also the recommendation of the Rangarajan Committee set up for the purpose.

The UPA government had accepted the guidelines on January 10 this year but could not notify it because of the electoral code of conduct.

It seems the new government is not too sure about the formula suggested by the ministry’s guidelines as well as by the Rangarajan committee. A fresh round of consultations with the stakeholders means that the government will not go back to the old formula and it is seeking for a new one, probably which is more acceptable to the stakeholders, especially the owners of the Krishna-Godavari off-shore gas wells.

On the other hand, the government seems to have had no problem in accepting increases in the minimum support for the kharif crop. The MSP for paddy has been increased from Rs 1310 per quintal to Rs 1360 for the common variety, and from Rs 1345 to Rs 1400 for the Group A, that of arhar/toow/tuwar from Rs 3300 to Rs 3350, that of moong dal from Rs 4560 to Rs 4600, and that of cotton from the short staple Rs 3700 to Rs 3750 and from Rs 4000 to Rs 4050 for the long staple.

Minister for Law and Justice and Telecom and Information Technology Ravi Sahankar Prasad said that the details of the contours of the agreement with China on allowing that country to build industrial parks in India can be revealed only after the MoU has been signed.

Natural Gas and Pteroleum minister Dharmender Pradhan refused to say anything more than than the consultations will take place and the cabinet has deferred decision on gas prices guidelines for three months. He did not want to elaborate on the mechanism of the consultation with the stakeholders. Prasad clarified that the common interests of the people will be kept in ming while deciding on the issue.

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