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Gas pricing will ensure profit, not windfall profit: Arun Jaitley

New Delhi: Days after approving lower than demanded gas price increase, finance minister Arun Jaitley has said the $5.61 per mmBtu rate will ensure explorers make profit but not windfall gain.The increase in rate, approved

PTI [ Updated: October 20, 2014 21:42 IST ]
gas pricing will ensure profit not windfall profit arun
gas pricing will ensure profit not windfall profit arun jaitley

New Delhi: Days after approving lower than demanded gas price increase, finance minister Arun Jaitley has said the $5.61 per mmBtu rate will ensure explorers make profit but not windfall gain.

The increase in rate, approved the Cabinet committee on economic affairs (CCEA) on Saturday, balances interests of oil and gas explorers and consumers, he said here.

"It is a rational decision ... Even at this ($5.61) price, the explorers are going to make profit. They won't have a windfall profit. At the same time, the burden of consumers will be minimal," he said.

Jaitley said the CCEA approved price of $5.61 per million British thermal unit as against $8.4 per mmBtu approved by the previous UPA government and higher rates demanded by private firms like Reliance Industries and BP, balances incentives for investment and consumer interest.

"We balanced the decision where there is incentive for investment in the sector and at the same time the consumer is not overburdened," he told ET Now. "With this decision, the explorers may not make a windfall profit, they will make a profit."

Jaitley added that he was not against business. "Well it is a balancing act. I am not against business, or against big business. I don't consider profit a bad word. I think it is windfall profit that is a bad word. Therefore, this (gas price hike) ensures profit rather than windfall profit, at the same time this also factors into interest the aam aadmi."

The NDA government after coming to power twice deferred a decision on gas price hike, which was originally due on April 1, to hold wider consultations. A gas price increase will result in rise in cost of fertilizer production and hike electricity tariff as also CNG price.

Jaitley said the gas price decision was "professionally taken."

A committee of secretaries excluded the irrelevant factors in the Rangarajan formula, which was approved by the previous UPA government, and included the relevant.

Asked about explorers not being particularly overjoyed by the hike announced, he said, "There is a difference between profit and windfall profit. With this decision the explorers may not make a windfall profit, they will make a profit."

 Rates will be revised biannually as the prices have to be realistic, he said. "The prices don't have to favour one group. They can't favour just one group, the prices have to realistic, they have to be market centric, they can't be merely centric towards windfall profit."

Answering questions on growth prospects, the Minister said: "The economic activity has to be enhanced, investor confidence has to be regained, investment cycle has to restart, and it's a slow process. We have the advantage of a parliamentary majority, but we have the disadvantage of not being a majority in Rajya Sabha. We also need majority in states."

On reforms, Jaitley said, "The Prime Minister and I (are) determined to move in that direction and I think the last five months is an evidence that we have moved in one direction."

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