Needed - some Simple Answers !

This is with reference to the controversy surrounding the pricing of KG-6 gas of Reliance , which started with $ 2.4 , is currently $ 4.2 and slated to rise to $ 8.4 / unit , from April 2014

Writing in yesterday's Times of India , ( Swaminomics ) , eminent economist , Swaminathan Anklesaria Aiyar , made following points  :

>   Reliance ( KG - 6 ) accounts for only 10 % of the gas production in our

     country . Balance 90 % is by Public Sector Companies such as ONGC etc

>   Hence , any increase in selling price will mostly benefit government itself

     ( Any idea , what will government do with this windfall  ? )

>   Price - hike envisaged is recommended by a committee headed by Mr C

     Rangrajan  ( - implying , infallible / sacrosanct  ?  )

>   By introducing price control on gas , " India's name is mud globally , and

     top exploration companies now avoid India "

>   An economic rule of thumb is that " traded Commodities " should be

     priced on par with the import price ( my question : irrespective of the

     actual cost of production in India ? )

     The Rangrajan price of $ 8 / unit , is well below the import price

Not being an economist , I am confused  !

May be Mr Aiyar can dispel my following doubts  :

#   By taking out of our own soil ( or sea ) , does gas become a " traded

      commodity "  ? - even if entirely sold in India ?

#    Is KG-6 gas a " Natural Resource " which belongs to the Nation - and

       not to Reliance  ?

#    Is Reliance the " Owner " of the gas or a mere " Contractor "  ?

#    Would Mr Aiyar , want the Central Government to extend the same logic

      to other " Natural Resources " ( belonging to the country ) , being dug

      out from the earth ( by private companies ) , such as :

      *   Oil / Coal / Shale Gas etc  (  Fossil Fuels )

      *   Ores of Iron / Copper / Zinc / Aluminum etc

      *   Trees ( timber ) that grow in our jungles

      *   Any number of minor minerals / chemicals

      Should these too , be treated as " Traded Commodities " , whose local

      selling prices must be same as Imported prices ?

#    What about the air / wind that blows freely over our land  ?

      Does it belong to the Nation or not  ?

      Or , does it belong to the Companies setting up  WIND FARMS  , to

      generate electricity  ?

      Should such power be " Price Controlled " or not  ?

#    What about the Sunlight that falls on our vast land  ?

      Who does it belong to  ? To our government or to the companies setting

      up mega Solar Power Projects  ?

     Should there be a price control on such power - produced , using a  National Resource  ?

#    What about the hydro - power generated by private sector companies

     from the water flowing in our Country's rivers  ?

     Does - or does not - that water belong to the Nation  ?

     Should not such power be price - controlled  ?

#   Tomorrow , if a private sector company ( or a consortium of Indian

      Companies , in joint venture with foreign companies ) , invest Rs 1 Lakh

      Crores , to build the 22 Km long Kalpsar Dam across the Bay of Cambay

      in Gujarat , and generate 10,000 MW of power from Oceanic Tides  , -

     can they be allowed to set any selling price  ? At International price  ?

     I suppose , it would be next to impossible for them to " Export " such

     power beyond the shores of India  !

#   Incidentally , what about the Airwaves ( the 2G / 3G Spectrum )  ?

     Is that also a Natural Resource which belongs to the Nation ?

     Having " licensed " it from the Central Government  , can Mobile

     Phone companies , set any selling prices for their services  ?

Even with a combined debt of around Rs 2 Lakh Crores , how are these

    Mobile companies , able to deliver ( nearly ? ) cheapest mobile phone

    services in the entire World ? May be at 10 % of international price  ?

#   In ALL of the above - mentioned cases , should Central Government

     carefully calculate / frequently audit , the " Cost of Production "  ? Then

    link the " Local / Domestic , Selling Prices "  to such " Cost of Production "

    allowing certain  pre-determined " Return on Investment "  ?

#   Even as we agree that " Export prices " of gas are governed by prevailing   

     international prices , how come the " Domestic Prices " of gas are vastly

     different in different countries , ranging from under $ 1 to $ 5 / unit  ?

     Does this itself , not prove that , in each country , domestic prices are

    linked to their own local " Cost of Production "  ?

#  Very often , have we not exported , food grains , at " Below the Cost " ?

Mr  AIYAR ,

You will be doing a great service to millions of ignoramus like me , by offering your own " Views " on the points raised above

And , I suppose , since the fall in production from KG - 6 , is purely and entirely , due to " Technically Sound " reasons , raising of the selling price to

$ 8 ( or even $ 16 / - ! ) , won't result in any increase in production !

Time alone will tell  !

*   hemen  parekh  (  17  Feb  2014  /  Mumbai  )