Speaking to CNBC-TV18, Sharma said, "It is a very positive news and getting this before launch of New Exploration Licensing Policy (NELP X), I feel this would be very well received by the domestic as well as international investment community in oil and gas."
Sharma says the government's move is logical and practical, keeping in mind the fact that the case was under arbitration and that retrospective recovery from consumers would've been a massive issue.
Below is the edited transcript of Sharma's interview to CNBC-TV18.
Q: It has been going back and forth but finally there seems to be clarity and certainty as far as gas price regime is concerned. It will be interesting to see when the government finally decides to notify the new norms or the new rules but nevertheless big relief for Reliance Industries?
A: I would not say that it's a big relief for Reliance Industries. I would speak on behalf of the industry especially in the interest of increasing domestic production of gas as well as oil. So, it is a very positive news and getting this before launch of New Exploration Licensing Policy (NELP X), I feel this would be very well received by the domestic as well as international investment community in oil and gas.
Q: Do you think that the decision by the cabinet not to cap gas prices which was something that was vociferously batted for by the finance ministry is going to lead to trouble as far as the power sector and the fertilizer sector is concerned?
A: That is the issue which the government has to take care. I am talking of the production sharing contract (PSC). Model PSC was approved by the government at the highest level and the actual articulation in that the contractor will have freedom to market gas subject to government approval.
So, this is the precise articulation in the model PSC and that has been the signed PSC. As per that, the implication is that the contractor has the freedom to sell at the market determined price and the government has the decision to allocate whomsoever they want to allocate. The issue of cap was a very negative thing for the industry. Being the industry veteran I would say that was absolutely wrong.
That was reflecting against the credibility of the sovereign government itself. So, why that issue was allowed to assume that much controversy?
Q: This business of actually getting Reliance to submit a bank guarantee to protect the government's interest while the arbitration proceedings continue but allowing Reliance to sell at a higher price come April 1 2014, you believe the most practical and pragmatic approach to take this matter forward?
A: I would say that is a logical and practical approach because when the arbitration is going on – earlier the thinking was that until arbitration is going on we should not allow higher price. The thing is what happens subsequently if they win the arbitration? Who will allow the gas price to be raised with retrospective effect?
Consumer surely will not pay that so where from that will come. So, that was a practical view, allow them the international price. Incase, they lose the arbitration, the government can make the recovery from the contractor. However making recovery from the consumer and there are numerous consumers that would have been practically impossible. So, that is a logical and rational decision. I would support that decision.
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