RIL-BP step on the gas, after 3 years of govt delay PDF Print E-mail
Friday, 16 June 2017 00:52
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While there’s finally good news on gas, the govt would do well to privatise HPCL since that will add to competition

Though the headlines are about the $6 billion RIL-BP will invest in its KG Basin gas fields, the most important number to focus on is the $20 billion that BP Group Chief Executive Bob Dudley said would be the LNG imports that could be avoided as the combine took out 3tcf of natural gas over the life of the discoveries. Not only will the fresh investment help create 20,000 construction jobs over five years and reduce the country’s import dependence for fuels, it also means a valuable lease of life to industrial units who benefit from additional supplies of natural gas. That RIL-BP is going ahead with such a large investment commitment despite the ongoing disputes with the government, including the odd one on unjust enrichment for ‘stealing’ ONGC’s gas, is a sign of the increasing maturity both it and the government are displaying, and their ability to separate the historical disputes from the current work.

It is also to petroleum minister Dharmendra Pradhan’s credit that he managed to reverse the government’s rigid stance on gas pricing. After the BJP swept to power three years ago, it refused to honour the UPA’s commitment to raise gas prices in keeping with the recommendations of the Rangarajan committee—it argued that this was aimed at mainly lining Mukesh Ambani’s pocket. That was always an odd position to take given those producing crude oil were allowed to charge market-prices and, indeed, the contracts signed by the government always allowed gas-producers like RIL to charge market prices. Also, given that ONGC produced more gas than RIL, it would have been the largest beneficiary. Not surprisingly, fresh gas exploration ground to a halt, and RIL even announced it was going to be exploring for oil and gas in Mexico. Though the government reversed its position on gas prices a year ago, oil prices had crashed by then, so the same companies that would have rushed in for exploration/production at $100 were more circumspect—it took RIL-BP a year to firm exploration plans.

Pradhan’s next job is to ensure the government does not repeat the same mistake of not liberalising rules in time. After meeting Ambani and Dudley on Thursday, he tweeted about inviting them to participate in India’s petroleum retail market. And, although RIL is already into fuel retailing, at the joint media briefing, Ambani-Dudley spoke of fuel retailing, among other plans that included work on advanced low-carbon-energy solutions. While RIL is making inroads into the market for diesel using its retail outlets on highways, it can’t make any serious impact in cities unless it is able to get land to set up petrol pumps. The surest way of allowing private players—not just RIL-BP—to scale up in the retail segment, in cities especially, is to privatise either a BPCL or an HPCL. Yet, instead of increasing competition that will benefit customers, the government is working on combining HPCL with ONGC—whether through a direct sale or a merger is not clear. In any case, with the government still controlling 75% of the market through an IOC and a BPCL, there is no question of a private player—whether an RIL-BP or someone else—cornering the market. Also, merging an ONGC with an HPCL is not going to be easy given their different corporate cultures—after all these years, even the government acknowledges the merger of Air India and Indian Airlines was a failure. It is still not too late for Pradhan to take the right decision.


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