Don’t let private cos override public interest in KG Basin: EAS Sarma
May 11, 2010
In the wake of the recent SC ruling, the Union government cannot abandon its own obligation to exercise due diligence and prudence in fixing the price of gas & determine the sectoral and regional allocations, a former secretary to the government of India has said in a letter to the prime minister
EAS Sarma, a former secretary to the government of India, has requested the prime minister not to allow the government to be pressurised by a private company to overlook the public interest involved in the KG Basin gas development.
In a letter dated 7th May, Mr Sarma wrote to prime minister Dr Manmohan Singh saying that in the wake of the recent court ruling, the Union government cannot abandon its own obligation to exercise due diligence and prudence in fixing the price of gas, determine the sectoral and regional allocations and take all such measures necessary to prevent the supplier from exercising monopolistic leverage to the detriment of public interest.
Here is the letter written by Mr Sarma...
Dr Manmohan Singh The Prime Minister New Delhi.
Dear Dr Manmohan Singh,
Subject: Natural Gas Pricing—Latest orders of the Hon'ble Supreme Court
I am happy that the Hon'ble Supreme Court has ruled unambiguously that the Production Sharing Contract (PSC) with private parties cannot override the inalienable right of the State and the people of the country to the natural gas resources that belong to them.
As reported in the press, it is significant that the Hon'ble Supreme Court has also made the following landmark observation.
"It is the duty of the Union to make sure that these resources are used for the benefit of the citizens of this country. Due to shortage of funds and technical knowhow, the government has privatised such activities through the mechanism provided under the production sharing contract. It would have been ideal for the Public Sector Undertakings (PSUs) to handle such projects exclusively."
Against this background, I wish to impress upon the government that the Central government cannot, in the wake of the latest Court ruling, abandon its own obligation to exercise due diligence and prudence in fixing the price of gas, determine the sectoral and regional allocations and take all such measures necessary to prevent the supplier from exercising monopolistic leverage to the detriment of the public interest.
In this connection, I enclose here a copy of the detailed letter dated 22 August 2009 I had written to you on these very same issues that continued to be relevant even after the latest Court order.
The price fixed by the Empowered Group of Ministers (EGoM) is based on a contrived bidding format that was more beneficial to RIL than the public. The present arrangement of the EGoM administratively fixing the price goes against all canons of competitive price fixation. The EGoM had, before it, the details of the price quoted by the supplier in a global competitive bid floated by NTPC. It was around $2.34 per million metric British thermal unit (mmBtu). Ignoring that price in favour of the price obtained by RIL through a procedure that would fail to stand the test of good competition, the EGoM adopted a non-transparent process to accept the price indicated by RIL, raising questions of propriety.
When I requested both the ministry of petroleum and the Cabinet secretariat to provide me copies of the EGoM proceedings under the RTI Act, the government chose to cite "confidentiality" as an excuse and deny me the same. (Perhaps, the latest move on the part of the government to amend the RTI Act to preclude Cabinet proceedings from the public is a sequel to this, to keep such crucial decisions from public knowledge!)
I request the government to review the price fixed for the Krishna Godavari (KG) Basin natural gas in such a manner that the price is in the public interest. The mechanism of pricing should not be politicised. Instead, it should be entrusted to a statutory authority like the petroleum regulator, as already envisaged in the PSC itself. The government should also carry out an economic evaluation to arrive at the sectoral allocation priorities for natural gas, as suggested in my earlier letter.
I may mention in this connection that gas development is known to cause land subsidence. In the case of KG Basin gas, the ministry of environment had conveniently bypassed evaluating this aspect while according environment clearance to RIL. Some concerned citizens had to approach the Hon'ble Andhra Pradesh (AP) High Court to intervene and order a fresh environment appraisal of the project. The KG Basin comprises the heartland of agriculture of Andhra Pradesh and if there is land subsidence in that basin, it will break the backbone of the state's economy. The state and the Central governments are oblivious, indifferent and perhaps insensitive to this impending calamity that is waiting to happen.
I hope that the government does not allow itself to be pressurised by the private company to overlook the public interest involved in KG Basin gas development.