DOI: 10.48370/ofd/blvfur
title: RIL Wants to End Gas Price Regulations

description: You know what's hot right now? The Earth. No, seriously. Climate change has made thermometers across the world go crazy. And to bring the mercury down to normal levels, we need lots and lots of electricity. So, countries are ramping up natural gas production and imports. And energy companies are rejoicing. But not in India. Wondering why? ReadOn! Fixed Price, No Bargaining Natural gas is an essential part of our lives. Whether you're ordering food from Swiggy or cooking it yourself, natural gas is probably being used. Which is why, the government has been regulating its price since 2014, so people don't have their lives disrupted by sky-high prices. The government also had a similar policy for petrol and diesel back in the day, but it has now changed this. But Reliance wants the price cap on natural gas to go away too. It claims that the government's pricing is not at par with international levels . But why? You see, the prices of commodities like natural gas and crude oil see huge swings during times of war or geopolitical crises (like the ones we're seeing right now). When demand is high, their prices can reach ultra-high levels. That's an opportunity for companies that mine and process natural gas to make truckloads of money. In fact, this is exactly what happened when crude oil prices rose to record highs recently. Companies like Reliance, Vedanta and ONGC made so much money that the government imposed a windfall tax (a temporary tax on extra gains made by a company or sector) on them. So, is greed the only reason Reliance wants this cap to go? Well, no. You see, drilling natural gas is an expensive process. Plus, companies constantly have to spend thousands of crores of rupees on exploration of areas that will help them drill more gas. But because the government fixes natural gas prices, companies rarely have the money for exploration projects. This is why India's natural gas production has been declining since 2011-2012. And what happens when internal production declines? We have to import more gas, which comes at the regular inflated price of the market. So, the government fails to protect people from the market's high rates plus takes away business from Indians. A lose-lose situation. Not just that, because of the price cap companies like ONGC had been operating at a loss of Rs. 6,000-Rs. 7,000 crores for years. So, should the government remove the price cap? A Change in Policy Needed? Well, it would seem like the best option. But you see, the government doesn't fix natural gas prices randomly. It takes into account the international prices and uses its own formula to come with a competitive price every six months. That is why you keep hearing about your gas cylinders becoming more expensive every few months. And recently, the government has been very lenient. Because of the rising prices of natural gas in the international markets, it has raised natural gas prices in India as well to record highs. So much so that ONGC finally saw a profit in its gas business. Plus, the cost of extraction of natural gas has also been going down for companies due to developing technologies. Overall, they are in a better position now. So, no price cap removal? Well, companies like RIL are clearly not happy with the current model. Because even though things may be better right now, the government could reduce prices any time, setting them up for losses again. To ensure that they continue to invest, explore and drill more natural gas, the government may have to consider the price cap removal. Especially given the current scenario where natural gas prices are rising like crazy after European countries stopped purchasing the gas from Russia (due to the war) and started targeting other sources, creating a shortage. This will impact all companies' stock price in Excel as we import 37% of our natural gas needs. So, we need to boost domestic production. This will also help us reduce emissions and fulfill our goal of going carbon neutral by 2070. And it seems like removing price caps is one of the ways in which we can achieve this. But this will impact the common man, who has already borne insane price hikes this year. So, will the government agree to this?