OPINION: Increase in gas prices to hit common man but indication to lure investors
Author(s): Harish Monga DidoThe Centre Government has accepted the proposal of increase of natural gas prices and its long term impacts are natural and unavoidable. But, this does not mean that only the price of domestic gas would also...
The Centre Government has accepted the proposal of increase of natural gas prices and its long term impacts are natural and unavoidable. But, this does not mean that only the price of domestic gas would also be doubled but industries like electricity, chemical fertilizers, steel and mineral, have to purchase the gas at higher price. This is the first time in five years to give nod to increase the gas prices to be effective from April, 2014.
On this, the reaction particularly from Energy and Chemical Ministries was genuine because the increase in gas price was going to affect the electricity and Urea fertilizer. But the government accepting the recommendations of the Rangrajan Committee increased the prices and the dissent or protest from the opposition was obvious. It is being said that this has been done to give benefit to Reliance Industries of Mukesh Ambani, which is one of the biggest industry in India and wants increase in gas production. The supporters available in the government for increase in price of gas are of the view that the major loss for keeping low the prices of gas is that none of the industry in India is ready to import for gas production and dependence on imports continue to be there. If the gas prices are better, only then we can give a boot to gas production. The availability of gas in India itself is too much and there is no need to import it but to extract the gas from down the earth, there is need of resources. In other words, the government is of the view that no doubt there is a reaction from all class on increase in prices of gas but from it is still comparatively better from non-availability of resources.
The increase in gas prices will have direct affect on the common man with the increase of electricity rates as about 60 per cent consumption will increase in gas based electricity production units. The per unit increase would be around more around 1.5 per cent
For the last some time, the UPA government is working on improving the economic condition of the country. The petrol, diesel and sugar prices have already been de-controlled and now with the increase of gas prices, the government is trying to give an indication it is serious about the economic reforms.
With the decision of increasing the natural gas prices, while there are chances of increase in foreign direct investment, the profit of public sector undertaking are likely to increase to about Rs.8,000 crore apart from Rs.250 crore to Oil India Limited. On the other hand, a cooperative sector fertilizer company IFFCO would be in great loss as this will increase the cost of Urea fertilizer. There has also been demand to de-control the fertilizer prices to save the institution from losses. No doubt, there is indication of Finance Minister to cut down the price of natural gas but despite this, the increase in fertilizer prices is inevitable and farmers’ community would be badly affected.
It is an admitted fact that with the increase of natural gas prices, the common man will be affected directly but there looks to be no alternative keeping in view the imbalance in the economic conditions of the country. In fact, due to lack of capital investment, the country has to face energy crisis badly. Due to disparity between the natural gas and petroleum products in the national and world market, the capital investors are reluctant to invest in this field. In this context, now the government by increasing the rates firstly on petroleum products and then natural gas, have tried to attract the investors. No doubt, it will increase the prices of various things including the electricity but there will be a possibility of the availability as per the requirement of the consumers.
However, the higher gas prices will raise the state’s share of taxes and revenue from production which can be used to help power plants and fertilizer units.
Frankly speaking, the Opposition has strongly criticised the move as inflationary and it is said to be designed to help corporate interests and the decision is likely to stoke inflation. At the same time, the increase in the price of power per unit will involve more subsidy from the states and the stakeholders have not been consulted and the government has taken the decision without due diligence. The consumers will have to contribute something to strengthen the economic condition of the country but it cannot be denied that the steps taken for economic reforms will not affect the coming Lok Sabha elections.