My young Nephew (Sahil Chitkara posted a nice piece on the implication of BJP by AAP... Here it goes: He did a press conference to tell about the price rise over gas issue. ( indianexpress/.../arvind-kejriwal-orders-fir.../ ) 1. Attack on RIL - He decided to take the easier but eye-catching route of going after the richest man of India. Kejriwal puts the future windfall accruing to RIL as Rs. 1.2 lakh crore. However, considering that RIL gets only 15 percent of the profit gas once 2.5times the capex is recovered, the post-tax windfall works out to about Rs. 15-25,000 crore for next 10 years of production peaking between 50-80mmscmd. PSU enterprises, led by ONGC produce two thirds of all gas production in India. Hence any rise in the price of gas will benefit ONGC the most, directly contributing in filling up the coffers of the state exchequer. Hence, his allegation that price of gas is being raised to benefit Reliance doesn’t hold ground. ( articles.economictimes.indiatimes/.../47774302... ) 2. The price change in gas has been recommendation by an eminent six member panel headed by C Rangrajan. While he allege that all these experts are on the payroll of Reliance, which is really condemnable, he conveniently hide the fact that this panel was appointed by Shri Jaypal Reddy, the then petroleum minister, who is a known Reliance oppose. What AAP could have done instead, if it really wanted to make right the wrong, was to question the economic logic of the Rangrajan panels methodology in arriving at the recommendations. Had the methodology been proved wrong, everything consequent to it would have immediately fallen flat. 3. Method of Pricing - We are failing to consider the intrinsic value of the gas itself. Govt cannot price Natural gas simply based on production cost which is actually the extraction cost. Besides Natural gas is a non-renewable resource unlike other commodities and if price is too low we risk depleting all our stock forever. Since it is already traded in the international markets at a known price that is pretty much the current price of it 16 dollar and if govt. sets any price lower than that then it is in a way giving subsidy to NG buyers. If indeed NG was a renewable resource and India could produce it at 1$ per unit, while the whole world is selling at 16$ per unit, India would become richest country in the world selling NG. (thehindubusinessline/.../article4264578.ece ) (profit.ndtv/.../article-kelkar-panel-opposes... ) 4. Guts to raise issue -The decision to double prices was passed on June 28, 2013. The price rise from April 2014 has been introduced in the parliament around July 2013 there was a lot of debate over the issue and with lots of allegations on Reliance lobbying. (thehindu/.../rethink.../article4935805.ece ) The most common response of people defending his such half actions is “Atleast he is doing something.” Here, He used corruption for publicity and to further his image. The only use of such statements is found only in blaming other parties. 5. Blame Others - The right way to go about it is to let the SC investigate the case, not filing another useless FIR in Delhi police station, which is merely a gimmick by AAP to wiggle away from ruling Delhi to accuse BJP of being the stooge of RIL. It is stupid of AAP to accuse BJP of not protesting the gas price hike. A case has been won in Supreme Court on price issue in Gujarat due to efforts of Gujarat Government. BJP did protest in the parliament and outside the parliament and fought the price rise issue and is waiting for the results of SC probe. ( timesofindia.indiatimes/.../20885654.cms... ) (business-standard/.../left-parties-and-bjp... ) ( archive.indianexpress/.../sc-asks.../1176731/ ) 6. Govt. Selling Gas to Bangladesh Cheaply- Reliance partner NIKO is not selling Indian gas to Bangladesh. It is digging an old gas field in Bangladesh. Bangladesh is giving away its own gas to its own people at dirt cheap prices. In my opinion that is a short sighted populist move. (economictimes.indiatimes/.../arti.../30264248.cms ) 7. Inflation - Arvind Kejriwal said If the price rises to $8 per unit then it would strike the common man very hard as it would give RIL a profit of 54000 crore. That’s not entirely true since 73% of the gas used in our country is already imported at 16$ per unit and India currently spends about 10 lack crore on Imports of gas. Main motto should be to become self-dependent in gas exploration and production but his action would negatively impact investor confidence in India. 8. The recent controversy related to Reliance was on Natural Gas. While the domestic cylinders which we get have Liquefied Petroleum Gas. Check what AAP Social Media activists are spreading on prices of LPG cylinders. (https://facebook/ArvindKejriwalIndianIcon/photos/a.451309118255366.123478.451300601589551/701765399876402/?type=1&theater ) Increase of price of Natural gas is condemnable but don’t they know any increase in NG prices will have no impact on LPG. 9. Potential - But important points to note are, Was it for a newly discovered gasfield under new exploration effort, or for old field which was discovered very earlier in an area whose potential was easy to estimate using less costly old techniques in an area which was already identified with proven potential, or it was for an area whose potential was not estimated before and reserves or scant, or whether it is a newly built deep sea oil field built incurring cost at latest dollar rates? We dont know what is the potential of indian gas reserves, for example prospecting for oil in gulf in the seventies would always be cheaper than prospecting for oil in india in seventies. Because the chances of hitting oil in gulf even in a small block is more as it is already proven and the oil reserve too will be high in keeping with the surroundings, but you can see the ONGC record to know whether prospecting for oil in India in massive blocks which have no known records of oil reserves using very costly techniques in the seventies is same as the gulf. I am not at all saying that 8 dollars is justified but dont reduce indias oil exploration industrys prospect to such a level that the people who are going to be hit hard is ordinary indians like you and me who is going to pay more than 12 dollar per BTU for imported gas that too using scarce forex reserves. 10. Dependent on Import – Whether RIL gold plated KG basin oil field exploration costs or not will only come after through investigation which is already going and not through the stupid gimmick FIR filing line adopted. But investigating it this way will totally shatter investor confidence, derail private participation in indias oil exploration sector. But the problem is it is a complex issue, the, price of natural gas should be at a level that rewards further exploration in a speedy manner and indigenous reserves to be exploited in a fruitfull manner. For example any one quote a lower, near 2 dollar per BTU well head price in US for a particular oilfield to make the 8 dollar per BTU price as a steal and make india totally dependent on imported natural gas at twice the 8 dollar by MTU proposed by rangarajan committee. ( firstbiz/.../mr-kejriwal-grow-open-letter... )
Posted on: Mon, 10 Mar 2014 07:10:35 +0000
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