A file photo of an oil tanker
In our growing up days, we heard our more privileged friends and cousins talking about their American goodies and booties. Today, we hear buzz around first consignment of American crude oil, and now LNG hitting the Indian shores.
This makes one wonder on our ‘American obsession’. A little birdie says this will probably be the most expensive gas India will be buying in recent times. So, why wasn’t the contract re-negotiated?
When we have re-negotiated contracts with Qatar’s RasGas and Australian Gorgon project, why not this? It’s not that attempts were not made to re-negotiate, but success remained elusive – the Indian firm it seems was told take or pay!
Besides, there was little that the government could do, most of the American contracts are commercial with little government involvement. So, the Indian firm is stuck in a deal it can neither swallow nor throw.
It now has to buy gas at a price, which is much higher than the existing contract and spot prices. The spot market price is in the range of $10-12 a unit (gas is measured in million British thermal units) and long-term is at $10-11 a unit.
At a time when the government is promoting gas-based economy and with the domestic production unable to match the demand, dependence on imports is almost 50 per cent. And every cent paid has a bearing on our foreign exchange, which is precious, in the language of bankers and economists.
While the politico can play their games over the deal – which regime it was signed, so on and so forth, one lesson definitely to be learnt from this contract is that politicians and bureaucrats should be kept out of commercial deals.
Also, today the market dynamics has shifted. Consumers have a larger say, so when penning contracts, Indian firms should not go on a weak footing, said a veteran. Point taken!
But, for now it’s only GAS – American Gas!
Published on March 30, 2018