In an interview to CNBC-TV18 energy expert Narendra Taneja and market expert SP Tulsian shared their views on AAP leader Arvind Kejriwal's allegations against oil & gas sector.
Below is the verbatim transcript of Narendra Taneja and SP Tulsian’s interview with CNBC-TV18's Reema Tendulkar and Sonia Shenoy.
Reema: Kejriwal has also said that he will take up this matter with the Prime Minister Manmohan Singh and demand that the hike in gas prices from April 1 should be kept in abeyance. This gas price hike was formulated according to the production sharing contract (PSC) of which the government is also a party to it. So, is there any merit in that?
Taneja: There are two points. First, can a chief minister of a state actually intervene in such matters? As far as the constitution is concerned, areas like oil and gas belong to the domain of central government and not any state government. They can intervene when it comes to matters like laying pipeline, law and order, but not in these matters. Secondly, they are throwing some charges, but not giving any evidence. Infact, I have been in touch with them and I have asked them to show me some evidence. They have promised to show it to me, but I have not been shown anything so far. To me it looks more politics than economics.
Unfortunately, what people don’t realize is that when you throw such charges against industry captains or create suspicion in the minds of ordinary people, it leads to creating suspicion in the mind of investors particularly foreign investors. That would lead to a situation that foreign investment which we desperately need in deep water exploration / production would stop coming. It has already stopped, but there have been some renewed efforts and there has been some response. However, even that would disappear and eventually would lead to some kind of economic anarchy. They should realize that this is an extremely sensitive sector. Gas is central to India's economic growth. So, play politics by all means, but don’t play politics with energy sector.
Also Read: PowerMin mulls Rs 6k cr subsidy to discoms for cheap power
Sonia: If the cost was so low that Arvind Kejriwal is alleging then how production sharing contracts between government and these explorers miss this fact? Do you believe any of these allegations that were put forth?
Tulsian: In 2007 price of USD 4.2 per mmbtu was decided by the government for a period of five years with effect from the commencement of the production by Reliance Industries. Reliance Industries started production on April 2, 2009, which lasted till 2014. If the cost is so low then who other players present in the KG basin which are the deep sea exploration? One is Oil and Natural Gas Corporation (ONGC) and second is Gujarat State Petroleum Corporation (GSPC). Except them, there is no third player.
Both these parties have been shouting that in deep sea exploration it is not possible and viable to explore gas at USD 4.2 per mmbtu. However, just to give a background, in 2007 price of crude was kept at USD 60 per barrel, so that means if prices would have fallen below USD 60 per barrel for crude, then prices would have got reduced. However, if it is going up then there won’t be any increase.
As far as the USD 2.34 per mmbtu matter is concerned, there is no point in talking about that because it has examined by Bombay High Court division bench and three bench judge of Supreme Court has decided on it because that is not a cost workable. If there would have been so much difference and so much profit why we would have seen lukewarm response for NELP auctions? Without taking all these things into consideration – I think these are just kite flying by Arvind Kejriwal. He is just saying that they should have supplied at USD 2.34 per mmbtu because that kind of figures have all been presented in case of power generation also.
These queries, objections and allegations were already dealt upon maybe at various levels including opposition and even the ruling government. We know that government has also slapped two penalties on Reliance Industries about USD 1.5 billion for two years where they have shown lower production for which the bank guarantee now being sort. So, taking all this into consideration, I think things are moving in a very nice way.
Sonia: You are saying that these allegations are baseless?
Tulsian: These allegations have no commercial or economic consideration. You can just sensationalise things. A layman can say okay Rs 44,000 crore you can aggregate the under or overstated profit of 10 years or 12 years, 15 years just to create a kind of sensation. However, I don’t think that it really has any kind of basis.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!