The Great Gas War

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Reliance vs govt: Who’ll blink first as Ambani ups ante on gas | Firstpost

The cat is out of the bag. Mukesh Ambani, boss of India's most cash-rich company, Reliance Industries Ltd (RIL), wants the government to free gas pricing so that he can make even more cash. At last count, Reliance had more than Rs 90,000 crore in cash or cash equivalents.

Wednesday's newspapers said Reliance has given the government a 90-day ultimatum to reach an "amicable settlement" on a pricing formula for Krishna-Godavari offshore gas since the current prices are below market levels. Firstpost has, in the past, speculated that falling output at the KG fields is linked to Reliance's unwillingness to accept a government-mandated price.

According to a report in the Hindustan Times, Ambani has charged the government with discrimination, saying it was paying foreign suppliers higher prices while giving it a sub-market price of $4.2 per mmbtu (million metric British thermal units). Landed prices of natural gas are currently in the range of $12-15 per mmbtu – more than three times the price fixed for Reliance.

These developments indicate that Mukesh Ambani is playing for bigger stakes: complete pricing freedom, which the government is loath to do. It has so far not found the gumption to even allow increases in diesel and cooking gas prices to rescue its own oil marketing companies like Indian Oil, Bharat Petroleum and Hindustan Petroleum from bankruptcy.

Reliance has been the prime beneficiary of the government's policy of fleecing the oil companies to keep petro-goods prices low, since it was free to export at a profit.

In this eyeball to eyeball confrontation between India's richest industrialist and the government, it remains to be seen who blinks first.

 

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This whole mess in the petroleum sector is because
1. It is a Milch Cow for the Govt. as it generates huge revenues.
2. Politicians are loath to let go of their powers, and do not want the oil industry to be free of controls.
3.This is a political tool and they believe that controlling the final petroleum prices can bring them electoral benefits.