EC overreach PDF Print E-mail
Wednesday, 26 March 2014 00:00
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Govt also to blame for reopening a done deal

Since the Election Commission’s (EC) job is to prevent an outgoing government from taking a new decision once the model code of conduct comes into being, putting the gas price hike in abeyance is a clear case of overreach. This was a decision taken last year and even notified on January 10, 2014, long before the code of conduct came into force. Indeed, while the EC is right in saying that the matter is also pending in court, a decision on reversing government policy on the grounds alleged in the PIL has to be taken by the Supreme Court, not the EC. In fact, while the case was filed in the Supreme Court several months ago, it never gave a stay on the matter despite the nature of the allegations made.

An equally large part of the blame, though, has to lie with the government, more specifically the petroleum ministry. After more than a year of discussions since the time the Rangarajan committee submitted its report, a decision on raising gas prices was cleared by the Cabinet on June 27 last year. Since there was the dispute over whether RIL had been hoarding gas in anticipation of higher prices, the Cabinet came up with a solution to that as well—let RIL give a bank guarantee for the extra money it was getting from the sale of gas, and were it to lose the arbitration on hoarding, the government would encash the bank guarantee. This was on December 19, 2013, and on January 10, 2014, the decision was notified by the ministry.

Various babus in the ministry then decided to over-interpret the matter. Was RIL filing the arbitration claim only on its own behalf, should RIL be asked to give a bank guarantee only for 60% of the amount—it owns 60% of the equity in the consortium—and more such questions were raised instead of finding a solution; namely, tell RIL to give a bank guarantee for the full amount and, if it refused, then tell BP and Niko that they too had to become party to the arbitration. In other words, the ministry gave the impression the matter was still an open one. So when the matter was referred to the EC, it was easy for it to get the feeling it was a new decision—after all, why else would it be referred to the EC? Meanwhile, as the decision gets bounced around, India will continue to import gas at $12-14 per mmBtu instead of paying players like ONGC $8—it is the largest beneficiary of the decision after the government which gets $550 million for each $1 hike in gas prices by way of increased royalties, taxes, profit shares and dividends.


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