A day after the hike in natural gas prices was put off by three months, India's largest gas producer ONGC today said it was unfair to expect a decision on such a complex issue from a government that's one month old.
Reliance Industries and Oil & Natural Gas Corp stocks plunged as the markets reacted negatively to the decision by the Cabinet headed by Prime Minister Narendra Modi.
State-run ONGC, the biggest beneficiary of a gas price hike, expects the new government to take a decision on the matter by balancing the interests of producers and consumers.
ONGC Chairman and Managing Director Dinesh K Sarraf said gas prices have a direct bearing on the costs of power, fertilisers, CNG and cooking gas.
The previous United Progressive Alliance government had in December approved a formula that would have doubled the current price of USD 4.2 per million British thermal units but did not implement it before general elections were announced.
"The previous set-up was not able to take a decision on the issue and now it is unfair to expect the new government to decide on the issue in such a short period of time," Sarraf said. The BJP-led National Democratic Alliance government was sworn in on May 26.
The UPA government-approved formula, if implemented, would have increased power tariffs by Rs 2 per unit and CNG rates by Rs 12 a kg, besides raising fertiliser subsidy outgo.
The Cabinet yesterday decided a comprehensive review, keeping public interest in mind, was needed on the issue.
"Three months is not a very long time... We are sure a decision will be taken in the interests of consumers, national oil companies as well as other stakeholders," Sarraf said.
He said gas pricing is a complex issue that involves various stakeholders - consuming industries such as power and fertiliser on the one hand and producers who want higher rates to tap yet-to-be-explored areas, on the other.
Higher gas prices would significantly boost production costs for consuming industries and increase inflationary pressures.
It would also help bring to production discoveries that are not viable at the current rate of USD 4.2.
"It also involves certain legal cases... all these make it very complex," Sarraf said, in an apparent reference to a case in the Supreme Court challenging the gas price revision.
RIL yesterday stated that it had already issued an arbitration notice for the delay in implementing the gas price revision for its KG-D6 field, which was due on April 1.
Hoping that the sanctity of contracts will be respected, it said, "RIL will continue to engage constructively with the government to achieve an expeditious closure of the matter."
It hoped the government would factor in how the continued deferment is viewed by the investment community.