The issue of how gas from auctioned acreages should be priced, thrown up by a set of legal tangles between entities controlled by the Ambani brothers on the one hand and Mukesh's Reliance Industries Ltd and NTPC, have divided policymakers. A number of MPs cutting across party lines and Congress functionaries have written to PM, Congress chief and oil minister opposing Andhra chief minister YSR Reddy's demands on the issue.
Reddy has written a series of letters to PM on pricing of gas from RIL's Andhra offshore field. These letters question the formula for working out the price, demand a preferential allocation for the state -- which, industry analysts say is like a first right of use -- and Central intervention in pricing.
Reddy's letters have evoked protests from MPs representing the Congress, RJD, BJP, Samajwadi Party and the JD -- several of whom are members of House panels on petroleum -- and some Congress functionaries. The essence of these letters appears to have indirectly raised a debate over the country's federal structure.
``...the Constitution Bench of the Supreme Court in a special reference case of 2001 in its judgment dated 25th March, 2004 clarified that only the Central government has exclusive competence to enact any legislation pertaining to oil and natural gas. Hence, the demand of AP Government on KG basin gas pricing and preferential allocation of gas is not justified and is unconstitutional,'' says one letter.
The letters also oppose any move by the government to artificially cap prices. Such a move will amount to Centre going back on its promise of allowing investors freedom on pricing with government approval, hamper efforts to attract investments in exploration and reduce the government's income from new discoveries.
Some letters point say Reddy's demands amount to taking `` undue interest'' in a corporate dispute and point out that demand for cheap gas is unfounded as many of the fertilizer and power companies are buying gas for a higher price from other sources.
