ujarat Chief Minister Narendra Modi has written a strongly worded letter to Prime Minister Manmohan Singh over the losses his state has incurred because of the Centre's revised energy policy. Modi has reportedly accused Delhi of creating a discriminatory policy against Gujarat, which has, according to him, cost its exchequer nearly Rs 8,000 crore.

Modi in his letter has condemned the secretive manner in which royalty rates for oil and gas in Gujarat were revised. The rates were revised downwards, linking them to the discounted rates at which crude was sold to oil marketing companies by the likes of ONGC and Oil India Ltd (OIL), instead of the prices being true to market movements.

He has also pointed out that since his state has to give all of its production to Indian Oil, while other major producing states such as Assam provide to other refineries as well, which offer no discounts, Gujarat ends up bearing the majority of the losses.

However, industry sources both in the government and private sector feel that raising the issue of oil and gas policy by Modi is for political mileage more than any actual discriminatory policy towards one state being implemented by the Centre.

"The Centre's policy is not Gujarat specific and applies to all states across the country," says a source close to the energy policy power corridors in Delhi, on the condition of anonymity.

"Gujarat led by Modi seems to have ambitions to gain an independent oil and gas policy, which then runs into conflict with Delhi. It is important to remember here that Gujarat is not the biggest oil and gas producer in the country. Modi knows that Prime Minister Manmohan Singh's government has bungled the country's energy policy, specifically in the past two and a half years, and he also knows that creating such discussion in public will also gain attention of all parties engaged in the Indian hydrocarbons sector."

Meanwhile, the Gujarat government has also demanded adequate natural gas supplies from the Centre for full utilisation of gas based power plants in the state. They have claimed that 24% of his state's total power production capacity is based on natural gas. However, total capacity of natural gas required for optimum use of the plants need 14.36 mmscmd of supply to generate up to 4,172 MW of power. At the moment, only about 4.47 mmscmd is supplied, a total shortfall of 9.89 mmscmd. Currently, there are 12 gas and liquid fuel based power plants in the state. Two new power plant projects that will be commissioned shortly, GPPC (700 MW) and CCPP-III (376MW) will require further 4.80 mmscmd of gas allocation.

The Gujarat government also claimed that the state has an unused capacity of 2,023 MW, which they have labelled as a national loss.

The Chief Minister has also reportedly suggested that if allocation of domestic gas is not possible for power plants to run at optimal levels, the Central government should arrange to buy such power generated from the spot RLNG or costlier gas through nominated agency and supply the same to deficit states, compensating the power producers for their fixed cost.

Narendra Modi has also previously used the apparent unfairness of the Centre's energy policy in his election campaign. He had blamed the allocation structure of the Administered Pricing Mechanism (ACM) of gas, which the government rations out.