This page has been divided into several parts to reduce the size and also confine itself to one particular issue.

Please find the links from Hit List

The details unfolded till date, even in Supreme Court of India, about the KG Gas pricing, supply and other matters in Supreme Court of India and elsewhere

Leaves one confused. More murky details are hidden / screened to fool the Nation

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'.

 

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Main / original content:  2001: Last minor modifications: June 12, 2010:     Personal website of R. Ranganathan M.Sc., [ MBA - IIMA]