Pt 1: The Great Indian Gas War -- Paranjoy Guha Thakurta Introduces 'Gas Wars'

Date Published: Category Video

On the 27th of June, 2014, the Press Club, Mumbai organized a panel discussion based on the book 'Gas Wars - Crony Capitalism and the Ambanis' written by Paranjoy Guha Thakurta, Subir Ghosh and Jyotirmoy Chaudhuri. On the panel, besides Parnjoy, sat Mani Shankar Aiyar, Kumar Ketkar and Govindraj Ethiraj. It was moderated by Gurbir Singh.

In this video Gurbir Singh introduces Paranjoy Guha Thakurta who introduces his book and reads excerpts from the same. He explains the issues involved with natural gas exploration in India and the involvement of the Government and the private and public sector companies particularly the two Reliance conglomerates run by brothers Mukesh and Anil Ambani respectively.

The book published by Thakurta himself, and distributed by Authors UpFront and FEEL Books, have been served legal notice from Reliance Industries Limited (RIL) and Reliance Natural Resources Limited (RNRL), and their respective Chairmen. The legal notice states that the book, its title and the website created to promote it, reveal a conspiracy to malign the name of RIL and RNRL, and contain defamatory material which are false, distorted and malicious.

According to Ajit Ranade in Mumbai Mirror on the 28th of June 2014 (​
(the book) is a 600-page book, based on four years of research, with incredible amount of data and annexures, including those based on an extraordinary access that the authors got to RIL documents and facilities. It is a book worth reading.

But the context and timing of the book's publication is also very crucial. It contributes to the larger debate and discussion on India's energy security. Gas constitutes only 7 percent of India's commercial energy consumption. Coal is 44%, petrol and diesel is 22% and biomass is 22%. Nuclear, solar, wind and hydel make up less than 5%. Coal and crude oil (from which petrol is derived) have well accepted, and market "discovered" prices. That's not true for gas.

The wellhead price can vary from place to place. Further the additional cost of transporting it via pipeline, or by liquefying it and shipping it in tankers across seas, affects its landed price. Hence the price of gas internationally can be anywhere from 1 to 15 dollars per unit. The book discusses the issue of gas pricing in great detail. The present government has deferred the hike in price of gas from Krishna Godavari basin by three months. The previous government had accepted the recommendations of a high level panel chaired by Dr. Rangarajan, to double the price of gas to 8.4 dollars per unit, effective April 1.

The recommendation is based on a formula which takes the average of four global prices, from North America, Europe and Japan. That hike decision itself was controversial, and earned the censure of the Parliamentary Standing Committee on Finance last year. That committee of which the current Power and Coal Minister was a member, pointed to "many anomalies", and the need for a proper audit before deciding the appropriate price. This gas price hike directly impacts the affordability of fertilizer and power, who are the main consumers.

But let's take a step back from the question of the "right" price of gas. (In a lighter vein, Aiyar said that his former ministry had become Ministry of Gas Pricing!) The bigger issue and questions are: what is the exact cost of producing a unit of gas in KG6? If the current price is unviable does that mean that the business model has failed at the lower contracted price? What then is the best way of compensating the risk that RIL has taken so far? For large and risky infrastructure projects like gas exploration, what is the appropriate regulatory model? Should government seek sweat equity? How to attract large risk capital in exploration? How will India reduce dependence on imported fossil fuels?"