* Govt last year approved near doubling of gas price from
* Move seen negative for energy conglomerate Reliance
* Decision on price hike now expected to be taken by new
(Adds details, analyst comments, background)
By Sumeet Chatterjee
MUMBAI, March 24 India's election commission has
asked the government to defer a hike in gas prices due to start
April 1, ahead of next month's election, a development that is
likely to hurt Reliance Industries Ltd and other gas
India last year approved a near doubling of gas prices from
the current $4.20 per million British thermal units to spur
investment in exploration for gas and boost returns for firms
including state-run Oil and Natural Gas Corp.
Some political parties, however, interpreted the move as
aimed primarily at helping energy conglomerate Reliance, which
has been calling for an increase in prices when the contract for
sales from its gas block off the east coast expires on March 31.
India's young anti-graft Aam Aadmi Party (AAP) party had
asked the election commission to put on hold the federal
cabinet's decision on the gas price hike ahead of the national
election, local media reported.
Petitions to block the gas price hike also were filed with
the Supreme Court, which is due to resume a hearing on the case
A cabinet panel approved the hike in June last year.
In a letter to the federal petroleum ministry's secretary,
the election commission said it had decided the proposal could
be deferred. The letter was posted on the commission's website
late on Monday. It did not elaborate.
"It sends a very bad signal to the outside world. In this
country, due to elections even the commercial decisions can be
postponed," said Deven Choksey, managing director at Mumbai
brokerage K.R. Choksey Securities.
A decision on the gas price hike is now expected to be taken
by the new government after it takes office in May.
Demand for gas in India far outstrips consumption, but the
government has kept prices low for strategic industries such as
fertilizer producers, deterring investment by companies in the
India, the world's fourth-largest energy consumer, has few
energy resources other than coal. It uses coal for nearly 56
percent of its energy needs, while oil, mostly imported,
accounts for 26 percent.
Reliance Industries, India's second-most valuable company
which is controlled by its richest man Mukesh Ambani, operates
the KG D6 block off India's east cost, where gas output has
fallen sharply since 2010.
Reliance and its partner BP have attributed this to
geological complexity. The Indian company has said gas prices
need to be increased in order to encourage further investment to
try and boost output.
Some analysts said the deferment of the price hike was
negative for Reliance in the short-term. Many brokerages had
upgraded their earnings estimates for Reliance and ONGC after
the price hike announcement last year.
"In the short term, this will create uncertainty about the
timing and quantum of the gas price hike. The company will have
to wait for a few more months," said Jagannadham Thunuguntla,
chief strategist at SMC Global Securities.
A Reliance spokesman on Monday declined to comment on the
election commission's decision.
But in a statement issued on Sunday, the company said that
the decision to implement the new price from April 1 was part of
a "contractual obligation", as the current gas prices are valid
till March 31.
"Even a bare reading of this factual position leads to a
simple conclusion: a change in gas pricing from April 1 is not a
new decision but only implementation of a cabinet decision taken
in June 2013," it said.
Arvind Kejriwal, the leader of the AAP who burst onto the
Indian political scene with a victory in Delhi's local election
in December, had ordered a probe into Reliance Chairman Mukesh
Ambani and policymakers over gas pricing last month.
Kejriwal, who was chief minister of the Indian capital for
49 chaotic days before resigning, said he would ask the federal
government to suspend any order to raise gas prices until the
issue was resolved.
"Thank you election commission for saving the people of
India from huge price rise that would have happened if gas
prices had increased from 1 Apr," Kejriwal tweeted after the
election commission's announcement.
(Additional reporting by Sruthi Gottipati; Editing by Jane