FIR against Moily? As absurd as one against Kejriwal

Aam Admi Party chief Arvind Kejriwal has filed an FIR (first information report) accusing petroleum minister Veerappa Moily of conspiring with Mukesh Ambani to raise the price of natural gas, bestowing billions of windfall profit on Reliance Industries Ltd. Now, the Ambanis and Congress politicians have committed a thousand sins over the years. I will cheer any serious attempt to nab them. But this must be based on solid grounds, backed by evidence. Instead Kejriwal has backed a silly conspiracy theory based on falsehoods.

Public sector companies, led by ONGC, account for two-thirds of all gas production. Reliance accounts for barely 10 per cent of gas production. It’s plainly false to say Moily is out to benefit Reliance when the biggest beneficiaries are government companies.

He has simply implemented a price change recommended by an eminent six-member panel headed by C Rangarajan. Kejriwal implies that all these experts are in the pay of Reliance. That’s an outrageous slander against highly reputed, honourable people.

Besides, the Rangarajan Committee was appointed by the previous petroleum minister, Jaipal Reddy, who was strongly anti-Reliance and opposed gas price increases. To claim that a committee appointed by Jaipal was actually tailored to help Ambani is incredible.

Illustrious civil servants (like TSR Subramaniam and EAS Sharma) have launched a public interest suit accusing Reliance of artificially jacking up exploration costs in the Krishna Godavari field to benefit from higher cost recovery. They also accuse RIL of deliberately reducing gas production in the last few years on bogus technical grounds, the real motive being to conserve gas till prices go up in April 2014. Only technical experts can give a verdict on these technical issues. Reliance should be penalized severely if found guilty. But that has nothing to do with the appropriate price for gas, which relates to all gas producers and not just Reliance.

The ONGC and Gujarat State Petroleum Corporation have also found offshore gas. The ONGC has repeatedly demanded at least $ 7/unit to make production economic. GSPC has asked for as much as $13-14/unit. India is currently importing huge amounts at $12-14/unit. The government has signed an agreement to import gas from Turkmenistan, using a price formula that is expected to cross $12/unit.

All gas exploration contracts say that gas discoveries can be sold at market price. Instead the government has instituted price control, so India’s name is mud globally, and top exploration companies now avoid India. An economic rule of thumb is that traded commodities should be priced on par with the import price. The Rangarajan price of $8/ unit is well below the import price.

A good way to expose the absurdity of Kejriwal’s FIR is to imagine an FIR filed by Moily against Kejriwal. Here goes.

“Arvind Kejriwal is in cahoots with oil multinationals (Shell, Exxon etc) to make India dependent on gas imports, bestowing a huge windfall on the multinationals. Many power stations in India are closed for want of gas. India’s gas imports have shot up to Rs 28,000 crore. The International Energy Association estimates that India’s gas imports will rise 72 per cent by 2017. There is an urgent need to incentivise a big jump in domestic gas production. Instead Kejriwal and Co conspire to keep gas prices so low that it is uneconomic to produce from huge offshore fields. They have ignored protestations from the ONGC and GSPC that offshore prices of $7-13/unit are essential to justify production. This is clearly a conspiracy to keep India gas-scarce, and bestow billions of dollars on foreign gas suppliers. What is Kejriwal’s own cut?

“Most countries give preference to domestic producers over foreign suppliers. But Kejriwal wants to give preference to high-priced imports over cheaper domestic production. This flagrant conspiracy aims to benefit MNCs planning huge new gas projects in Australia and Timor.

“Qatar is the biggest gas producer and exporter in Asia, and plans big production increases. It will obviously target India, one of Asia’s top consumers. Why do Kejriwal and Co want to benefit Qatar, a country that has sent huge sums to jihadis fighting in Syria? Is there a secret link between Kejriwal and jihadis? The police must immediately investigate this link and expose all anti-national elements.”

I hope all readers had a good laugh at this spoof. It aims to turn Kejriwal’s logic on himself, exposing the underlying absurdity. His conspiracy theory is based on a falsehood: that Reliance is the main gainer from a higher gas price. This spoof is based on a truth: that keeping gas prices artificially low, well below import price, is disastrous for the Indian economy, discriminates against all domestic producers, and hands a bonanza to foreigners.

8 thoughts on “FIR against Moily? As absurd as one against Kejriwal”

  1. the way you shown to us is like that then why ONGC is supplying the gas at rate of $4 to thermal power plant.

  2. Well articulated piece , but it is also equally true increasing gas prices increase the products that uses gas raw material. Obviously our living becoming hard in this rise of prices of commodities. It is accepted that kejriwal accusation is false and frivolous .But what about the above argument?

  3. Can you please help me understand how does that rule of thumb apply when you say commodities should be priced close to import prices. Does that mean no government support/subsidy should be provided to the explorers to help them get oil at a lower price ?

  4. Sir
    I wanted to ask you 1 question. I am an illiterate in economics but what i think is that even if we are to sell gas at market price, why the profit should be going to reliance and not the GOI? Please enlighten me Sir

  5. Dear Sir,
    Reliance and all other gas explorer companies irrespective whether public or private should declare the cost of production and after that a government should decide how much they will pay to these companies.
    why to behave stupidly talking about international market price we are debating price of gas produce in India.
    There is so much inflation and if the gas prices will go high almost double we will be in a very bad condition.
    The point is not whether what Arvindji is saying true or false, logic is correct we shouldn’t pay $8 for the gas Produce at $1. If companies can prove that production is $7 pound than there is no harm in paying $8. But companies has no be transparent .

  6. Dear sir,
    we will buy gas from Indian gas explorer companies at fair price so that they can make some money as well. if it is less than market price they should not worry as they are making money. Commodities are public property if government getting it at $4 from companies and market is $8 than government should import that gas to other country if any surplus left. company should not mourn about market price as they are getting price which includes there cost + profit.

    Price of gas only goes up if cost goes up, it can’t go up to increase companies profit.

  7. Wait a minute , did everyone think we are importing at 12 , that’s crap eg : Iran deal stands at 4 to 5 dollars , international price has nothing to do with buying price based on contracts , it may go up to 12 but allway’s below it ….concept of MRP

  8. Hello Sir,
    1. you haven’t declared the cost of extraction/production of gas per unit.
    2. Please provide proof of Kejriwal supporting foreign fuel explorers, i didn’t hear that anywhere.
    3. Take Indian ISRO’S Moon and Mars missions for example The purpose for them was to attract foreign markets by showing off their potential at a lower price than NASA. Would you recommend with your “”Commodity prices and imports theory” that ISRO should hike up the costs for greater profits to match up with NASA and consequently lose the business prospects?
    4. Any contract is handed out after examining the bidders’ ability to execute. If there were technical faults, why are they not explained in public domain and why do they stand unresolved for so many years?
    5. where do you get your import prices stats from? any evidence to back it up?
    I might be sounding total immature but i have given up on taking anybody’s words to form an opinion. Please Help

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