The price increase seems to be a consequence of RIL’s demand for a price revision over a year ago, and an attempt to head off a decision on a price revision in consonance with market prices. By offering a price now which will only be applicable in mid-2014, the government loses nothing and has everything to gain. Since the major part of the selling price goes to the state, why not let it benefit to then use it in a manner more productive?
I think the difference between the price announced and prevalent international prices is still large. What we basically need is a liberal economic regime, not one that robs Peter to pay Paul. Why should Ruias and Mittals sell steel at international prices while using gas at a subsidised price? I don’t think that is a deserved subsidy. And fertiliser, which is produced using subsidised gas, is a misdirected subsidy and goes to all the wrong people.
There is a direct relationship between oil prices and available reserves. As prices get higher, more reserves become viable. Most of the reserves lying just under the surface have been exploited. Now you need to go deeper and in far more hostile environments. Drilling 10,000 metres below in the middle of a deep sea is not an easy business and few have the expertise and technology to do so. This also becomes more expensive. If our feasible reserves go up, then we can extract more and reduce import dependency. Oil imports eat up almost 70 per cent of our exports.
Frankly, I don’t see many big players being attracted to take up an offshore block. ONGC OVL does not take up overseas blocks at pre-fixed prices. Why should we expect others to agree to this when investing in India? I think the best way to attract the big oil drillers here is to offer production-sharing options at market prices. My good friend Jaipal Reddy could never understand this. I am not sure if even Veerappa Moily understands this. But what the latter has understood well is that there are many oil brokers near and within government who collect good brokerages on every import deal. They are huge vested interests now and resort to the usual subterfuges to keep our energy dependency going.
The best yardstick is the international price. Today, we are importing coal at 1.5 times the domestic price. But in case of gas, while the international price is $13.77 per mmbtu, the price stated by the government is $8.2 per mmbtu. Is Mukesh Ambani happy with this? Why should Indian producers be penalised? And why is everybody so allergic to corporates making profits? Profits beget taxes and more investment. Companies don’t let their money lie idle. They always reinvest. But when politicians make money, it is for consumption. Besides, how much can one man consume? How many houses will Mukesh Ambani build and how many planes will he buy?
Somehow this issue of basic principles has been turned into a for or anti Reliance debate, when the only concern should be self-reliance. If there are grievances against Reliance, and I can expect there will be many, appropriate forums and institutions must be used for them. What we see now is a new and indigenous form of McCarthyism.
As told to Arindam Mukherjee
Mohan Guruswamy, chairman and founder of Centre for Policy Alternatives; E-mail your columnist: mohanguru AT gmail.com