The Union Petroleum Ministry has expressed surprise at the Finance Ministry's suggestion of restricting the impact of the gas price hike under the new policy, saying North Block had not once, but twice backed the plan during consultations. The letter from the petroleum ministry sent a few days ago will put the finance ministry in a fresh spot of bother as it was seen to be distancing itself from a decision of the Cabinet that is facing criticism.
There were allegations it would favour some gas producers and increase the burden on consumers and the government. The Supreme Court is also hearing a public interest litigation on the issue. While forwarding newspaper editorials along with its July 4 memo, the finance ministry had put six posers, which included capping the gas price hike and asking Reliance Industries to sell gas at $4.2 till it meets the shortfall in promised supply levels. Although oil minister Veerappa Moily has publicly rejected the suggestions, in its reply, the petroleum ministry has said it is examining the suggestions that were sent by the finance ministry.
It has also said that the pricing plan is in line with what is provided in the production sharing contracts. The memo came within a week of the Cabinet deciding on a new pricing policy that will push up gas prices from $4.2 to $6.7 a unit and is expected to rise to $8.4 a unit from April, when the regime kicks in for all producers. At the Cabinet meeting, the proposal faced stiff opposition from science and technology minister S Jaipal Reddy, with rural development minister Jairam Ramesh also lodging a protest amid explicit backing to the move by almost all ministers.