The Oil Ministry has criticized Delhi Chief Minister ArvindKejriwal’s claim that the gas price hike will benefit Reliance Industries Limited (RIL). The Ministry has also stated that the primary beneficiary of the revised gas price will be the Indian Government and in turn, the people as the Centre stands to get US$ 2.08 Billion from the gas price doubling.
This source of this additional revenue will be from additional profit petroleum, royalty and taxes accruing from natural gas prices rising to USD 8-8.4 per million British thermal units from USD 4.2 per Million British Thermal Unit (mmBtu) in April.
According to highly places sources within the Oil Ministry, State-owned Oil and Natural Gas Corporation (ONGC) will get up to US$ 1.64 Billion in additional revenues and Oil India around US$ 190 Million. RIL and partners BP Plc of UK and Niko Resources of Canada will get USD 0.51 billion additional revenue on 14 mmscmd of output.The government stands to receive US$ 500 million in royalty and profits, US$ 420 Million from dividends and another US$ 1.16 Billion from taxes on the additional revenue earned by the oil companies. The actual price hike was approved by an expert panel appointed by Prime Minister Manmohan Singh.
Delhi Chief Minister ArvindKejriwal said that a police complaint will be filed against Reliance Industries Limited Chairman MukeshAmbani and Oil Minister VeerappaMoilyfor creating an artificial shortage of gas in the country and raising gas prices. He further added that the new gas price formula would be hugely beneficial to RIL as it would result in 54,000 Crore of profit every year. Industry analysts say that Kejriwal is wrong to compare gas prices in Bangladesh and India. This is because the field in Bangladesh is onshore and requires far lower capital than a deepsea area such as KG-D6.The gas price hike will lead to USD 1.66 billion in additional outgo on fertiliser subsidy.
The Impact on power tariffs is not as big as Kejriwal claims it is. Around 5% of the power generated in India is gas-based and this price hike would increase the cost of generation by around Rs 1.57 per unit. In fact, the Supreme Court had given the go-ahead to RIL to raise gas prices from KG-D6 to US$ 4.2 as compared to the earlier quote of US$ 2.34. The term of that price ends in March and Prime Minister’s Economic Advisory Council Chairman C. Rangarajan had suggested pricing gas at an average of international hub prices and the rate at which India imports LNG.