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ONGC, IPCL resolve gas pricing issue

Pradeep Puri

Oil and Natural Gas Corporation has finally agreed to increase the price of gas supplied to Indian Petrochemicals Corporation Limited in phases.

With this, decks have been cleared for the privatisation of IPCL, which has been hanging fire for some time over the issue of quantity and price of the gas supplied to it by ONGC.

As per the agreement hammered out after prolonged negotiations involving the department of divestment, petroleum ministry, ONGC and IPCL, ONGC will supply the committed quantity of gas to IPCL even after it is privatised. It will increase the gas price to the international benchmark in phases.

"We should be signing the agreement in a day or so," a senior ONGC official told Business Standard on Tuesday. He, however, said some details of the agreement were still to be worked out.

One of the outstanding issues is the period from which the new pricing formula will be applicable. Though the previous agreement between the two PSUs had expired in March 2001, it is still not clear if the new price will be applicable with retrospective effect from April 1, 2001, or will take effect prospectively.

So far, ONGC was supplying gas to IPCL as per the Bureau of Industrial Costs and Prices formula at a concessional rate. However, it was demanding the international price for the gas supplied by it in view of the dismantling of the administered pricing mechanism in the oil sector and the impending disinvestment in IPCL.

This had dampened the spirits of all those wanting to bid for the government's shares in IPCL. The bidders had been demanding that the concessional pricing should continue even after IPCL was privatised.

Officials were hopeful that after the signing of the new pricing agreement, the government would be inviting financial bids from three prospective bidders-Indian Oil Corporation with the Chatterjee Group, Reliance, and Nirma-later this month. They said the IPCL divestment should be completed within the first quarter of this fiscal.

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