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CUTS
International, a think tank working on policy and
regulatory issues in the energy sector, supports
the stand taken by the Central Government that any
contract between two firms relating to the
extraction of a mineral resource should be
validated by the government. In a statement Mr.
Pradeep Mehta, Secretary General, CUTS
International stated that though the matter is
sub-judice, the government's move on the issue is
correct and in the wider public interest.
"The
government should intervene in the dispute on the
distribution of gas from the KG basin without
getting embroiled in the family or business
affairs of the Ambani brothers. Gas is a scarce
natural resource and national policy requires that
any private or public control over the gas basin
and resulting operations should be in the public
interest." Mr Mehta added.
Anil
Ambani claims that the contract with his brother,
Mukesh requires, Reliance Industry Limited (RIL)
led by the latter to supply gas at $2.34 per MBtu
(metric British thermal unit) to Reliance Natural
Resources Ltd. for 17 years. The long duration of
the contract limits the scope for competition
among potential suppliers. Ideally, the price
should be determined by demand-supply conditions
or through a competitive bidding process.
"There
are other public and private sector companies
waiting to undertake extraction from fuel sources
in the country. If the existing contract is
allowed to continue, it will limit the scope for
further competition in the sector. The KG basin is
one of the major gas sources in the country.
Therefore, such a long term contract should be
carefully scrutinised," Mr. Mehta stated.
"Not
only should the automobile industry, power and
fertiliser sectors benefit from the the basin, but
also gas based power plants presently unable to
start production due to lack of availability of
fuel. A major private generating company, Gautami
Power, has already joined the battle by filing a
petition in the Supreme Court. It is imperative,
therefore, that the government takes necessary
steps to resolve the matter at the earliest." he
added.
Mr
Mehta opined that the government as well as
regulator should avoid giving preferential
treatment to certain players in the market which
may give a wrong signal to potential investors and
inhibit entry.
Views
seem to be divided over whether control over
natural resources such as gas should be exercised
directly by the government or by independent
sectoral regulators such as PNGRB.
With
the Competition Commission of India becoming
active, the latter view appears to be the correct
one i.e. the government should function as a
catalyst for fair regulation through
public-private partnerships rather than an owner
with complete discretion regarding the use of
natural resources.
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