CPI(M) MP Writes To PM On Scaling Down

Gas Production in KG Basin

The following is the text of the letter written by Tapan Sen, CPI(M) MP in Rajya Sabha to prime minister Manmohan Singh on January 16^, 2012, on the fall  in gas production from the KG D6 field. A copy of the letter is also sent to S Jaipal Reddy, minister of petroleum and natural gas, govt of India.

KINDLY refer to my letter dated October 10, 2011 requesting you to kindly get natural gas pricing methodology critically examined by CAG, which has led to upsurge in price of indigenously produced gas without any linkage to its actual production cost.  You may recall, the price of natural gas was decided by the EGoM constituted for the purpose in the context of the “price discovered” by M/s Reliance and proposition made thereon.  

Unfortunately, I am not aware of any action being taken in that regard although the same had been an urgent necessity.  Almost Simultaneously and disturbingly enough, it is learnt that demand for further raising the price of natural gas is being made by the major contractor in KG D6 field. And such demand is also accompanied ostensibly with a calculated scaling down of production of natural gas from KG D6 field by the contractor in violation of the contract on a non-verifiable plea of ‘geological complexity’.

You are aware, the production of natural gas from KG D6 has come down from 45 to currently 38 mmscmd vis-à-vis the contractual commitment of 70 mmscmd. This, you will appreciate, has caused a direct loss to the country’s energy economy of around Rs 15,000 crore even going by a most conservative estimate, if only the cost differential of alternative feedstock by the gas-consuming sector is taken into account. The indirect loss, obviously, is much more. 

It is expected of the contractor handling the natural gas reserve to scale down the production of gas from KG D6 for achieving a premature price-rise from the government as a pressure-building tactic. But at the same time, it is also expected that the government would appropriately respond to such coercive tactics and decide as to whether the concerned field should continue to remain at all under the very contractor which is in perpetual default in terms of contract in the matter of production commitment. I understand, the government is very much empowered to make such review under the terms of contract. And I believe, such review is warranted in the interest of the nation.

I, therefore, urge upon you to please appreciate the gravity of the issue and intervene so that the entire contract related to KG D6 is reviewed in view of serious default committed by the contractor.