Be it Gas, Iron ore, Coal, Limestone or such other National Resources, they are alloted at a pittance to the Influential select few. Nation suffers. Public pays a higher price. The poor and downtrodden have never got their dues

 

6th June 2011. Some old background details are in this page. Some more or repeats are in background 2. In the transfer of files from one section to another, some data may have got lost or misplaced. Editing will be done later

- Public has been brainwashed with slanted and questionable details

Highlights: Government should take over the KG Gas Field in Public Interest.  Besides ensuring Power Security, it would save the Public from getting looted minimum 20000 Crores per year for 17 years. The reasons for this conclusion are based on the following facts / analysis.

Comment on 31-3-2011:  Reliance has / would be getting 30000 Crores in 2011 from BP in 2011, as per news heard in passing on Bloomberg UTV on 30th March 2011. ONGC's gas price has been raised to above 4 Dollars per mbtu in 2010. Gas is public property and the price has been raised in 18 months. Reliance questionable gas price as well as revenue to Government through ONGC has been protected. Gas is used in Fertiliser and Power Plants - Government will wail about the subsidy to them.

Reliance has already asked for raise in Gas prices. They may get it by 2012 / much before the next election.

DGH acted as the advertiser for Reliance in January 2011 and talked about increased gas supply from Reliance. Company clarified later that the output is likely to be less. The output may not rise till the Gas price is increased is my fear. Reliance is a major supplier / 50% producer of gas in India, the other being ONGC.

If the Gas belongs to the Nation and it has the power to decide the price, as Murli says when it suits the Government

for allowing Reliance to set a Selling price over 3 times the cost of Production, compelling ONGC to sell near towards Reliance cost of Production, making NTPC to submit to the dictates of Reliance

the Government, if it has any sense of integrity, should resign, from the Prime Minister downwards

It is the Public who are going to pay for the folly of the Government. Do we have a Government for the benefit of the Public or Mr. Mukesh Ambani, who does not even need Reliance Directors consent for committing the company or disowning an agreement ? Should the Nation's 50% gas security lie with one Individual ? Government did not want that when it came to ex CEC Sheshan. Mukesh Ambani's wealth is now comfortable 2.5 times more than what his father had in 2003 - recollection from Business Standard's list of Forbes Millionaires

 

The news in CNBC TV 18 On the inauguration Day of Cairn's field, the reported income per year to the Government was stated to be 20,000 Crores.

 In 13 years, it would be 2,60,000 Crores. 260000 is 3 times more than the revenue from Reliance. Compare, contrast and scratch your head.

Pricing:

Reliance cost of Production of Gas is only 1.28 Dollars / mbtu according to Directorate General of Hydrocarbons, a Government of India dept.

The Government was paying about 1.80 Dollars per mbtu to ONGC, till August 2009.

Why the Government / EGOM accepts a price of Dollars 4.20 for mbtu to Reliance, which is 3.28 times the cost of production of Gas. Was the number derived to connote everything to the Public ?

Prasad / Reliance: 'we get a base price of Dollar 2.50, if the crude falls to 25 barrels per barrel. Our price changes when crude price varies between 25 to 60 Dollars, at which stage, it is capped. There is a floor and cap'.

Either Reliance or Government is lying, when they say that the Gas Price was not fixed. Who ?

 

Explanatory Note: Meaning of some of the Terms used

The Media reprinted the Statements of Reliance, GOI, RNRL, NTPC and others, without much scrutiny. Clarity was lacking with excess use of Abbreviations. Dollar and Indian Currency were intermixed too often to confuse a reader further. So, a summary of the some published details and expansions of abbreviations are provided first

Terms used in abbreviations / news reports -  their meanings / expanded forms

At different price points, the likely price of Gas to an User / User Industry

Rs 3200 per thousand cubic feet, if gas price is fixed / decided at Dollar 1.79 per mbtu

Rs 4142 per thousand cubic feet, if gas price is fixed / decided at Dollar 2.32 per mbtu

Rs 7500 per thousand cubic feet, if gas price is fixed / decided at Dollar 4.2 per mbtu

Why KG Gas is a Scam ?

Reliance gets about 44% more than the Government. And Government is the authorised representative of the people, the real owners of the Gas.

The Selling Price is 3.23 times the Raw Material / Production cost, in an Essential Bulk Commodity item. And that stinks. What all Manmohan, Chidambaram, Kamal Nath blabbered on TV / Media, Inflation, WPI index. They have to be thrown out or the domestic TV has to be smashed to let out a bit of accumulating anger.

Production Sharing Contract [PSC]

In 2003, the undivided Reliance Industries gets the right to look for Gas in the KG [ Krishna Godavari ] basin after signing a Production Sharing Contract [ PSC ] with the Government. The full details of the PSC remain secret.

Country needs more Power Badly

The Congress led Government of Mr. Manmohan Singh, signed a Nuclear Treaty with America, despite some feared and undisclosed suspect clauses. As per recollection, the cost of Production, with Nuclear source, was quoted to be under Rs 6 per unit.

Should he have a special extra Economic Council or a commonsense council, in PMO, to aid in decision making.

Bring down the Power Cost with immediate effect and GDP can go up

If Gas is bought by NTPC from Reliance at 4.2 Dollars per mbtu, as Reliance wants and Government pressurises them,  the cost of Production will be Rs 3 / unit. This has been worked out by Mr. Prasad, Reliance Director ]

Should Government go out of the way to create a dominant / monopolistic supplier ? 

The indirect Tax collection of the Government is now 270,000 Crores per year. It is 750 Crores per day. We all pay tax on Match box and vegetables too if you think about. If we take 100 Crores as the population, the  annual cost, is Rs 2700 for every Indian.

We have the right to ask the Government for accountability. Unless cornered, Government will not give a categorical answer is of course, a perpetual reality. This page is about the potential scam, Reliance is attempting to thrust on the Public, with unspoken but blatantly evident, Government support

Hence, the Fight is now between the Public versus Reliance and Government combine

International Gas Price comparisons - January 2005:

Hindu's business Line,  Saturday, Jan 08, 2005 

Indo Iranian deal: 'THE LNG supply price in the Indo-Iran oilfield-for-LNG deal has been described as "fairly competitive" by the power sector generation utilities, especially if the rate stays below $3 per million British thermal units (mmbtu).

The deal, which was signed today, provides for import of 7.5 million tonnes of LNG from Iran at a price of $1.2 plus 0.065 of Brent crude average, with an upper ceiling of $31 a barrel on Brent prices.

At the upper Brent crude price of $31 dollars a barrel, the LNG cost would be $3.21 per mmbtu.

Another Quote: '

Petronas LNG, which competed with Reliance for the NTPC tender, quoted $3.45 per mmbtu only for the LNG supply. Coupled with the quote of Petronet LNG Ltd, which quoted $0.65 per mmbtu for regassification, the total delivered cost of gas at the power plant would have come to $4.14 per mmbtu as the second best price that NTPC had on offer.

 

Profit / loss of Revenue to Government - Questionable calculations / needless assumptions

The Petroleum Minister is playing to the Gallery when he shouts about the Government Revenue / loss of Revenue, with assorted baseless statements, which the Press faithfully reprinted, without any scrutiny.

a] What Revenue are they talking about ?

At 4.2 Dollars, total generated income from 10 tcf, would be 42 Billion Dollars. Government would get 17.8 Billion and remaining 24.2 Billion would go to Reliance

Out of this 17.8, only 9.2 is the Profit, if it is made. 6.5 Billion is by way of Taxes - Excise and Sales tax. 2.1 Billion / 5% of total revenue is the Royalty.

Shouting a figure of 17.8 is misleading. Relevant figure is the projected profit of 9.2 Billion in 13 years - that is 44160 Crores.

The Profit per year is only 3396 Crores - just 5 days indirect tax collection !

It is better to forget this 'notional loss, and take over KG fields paying Reliance, the cost incurred so far, subject to scrutiny'.

 

	Errors and Omissions exempted.  If there be any unwanted oversights, mistake in content or suggestions for improvements,  I will be thankful for your feedback
	Personal website of R. Ranganathan M.Sc., [ MBA - IIMA]    Main / original content: after 2005: last minor modification, June 5,  2011