After imposing a $1.005 billion (Rs. 6,291 crore) penalty on Reliance Industries Ltd (RIL), the government has slapped an additional penalty of $792 million (or Rs. 4,958 crore) on the company for producing less than targeted natural gas from its eastern offshore KG-D6 block, which is also India’s largest gas-producing block.
A notice disallowing $792 million out of the cost already incurred by RIL in the Bay of Bengal fields was sent to the company on November 14, sources said.
With this, a total of $1.797 billion (Rs. 11,249 crore) penalty in form of cost being disallowed, has been levied on RIL for producing less than targeted output during the past three years.
RIL has till date spent $10.76 billion (Rs. 67,358 crore) on the block, which it can contractually recover from sale of oil and gas. It is obliged to share the profits with the government only after recouping those expenses.
Officials said the cost has been disallowed as RIL and its partners, BP of the UK and Canada’s Niko Resources, did not drill the committed number of wells, which led to output dropping by over 80% in the two main gas fields (D1 and D3) in the KG-D6 block. RIL blamed geologicaal complexities and has begun arbitration against the levy.