KG gas pricing: govt to seek attorney general's views
The government will seek the views of the attorney general of India GE Vahanvati over the revision of price of natural gas being produced from Reliance Industries Ltd's (RIL's) KG-D6 fields, India's biggest gas-producing field. Anupama Airy reports. Not all gasbusiness Updated: Mar 12, 2012 02:00 IST
The government will seek the views of the attorney general of India GE Vahanvati over the revision of price of natural gas being produced from Reliance Industries Ltd's (RIL's) KG-D6 fields, India's biggest gas-producing field. While the Empowered Group of Ministers (EGoM) led by finance minister Pranab Mukherjee has fixed the price of KG-D6 gas at $4.2 per unit for five years starting 2009, the Mukesh Ambani-led firm has been seeking an increase in the gas price to a level, which is reflective of the market price.
The minutes of the February 24 meeting of the EGoM, a copy of which is available with Hindustan Times, reveals that the group noted that the wide divergence between the domestic (at $4.2 per unit) and international prices of gas (at $14-16 a unit) was resulting in the import of natural gas at a high price and was affecting the current account balance.
"The advice of the law ministry, including the views of Attorney General for India be obtained in the matter of gas price revision for consideration of the EGoM," said the minutes of the meeting. "The ministry of petroleum and natural gas could suggest an appropriate regulatory authority to aid and advise the EGoM on the issue," the note further said..
While making it clear that RIL's request for price revision has already been turned down in 2010 as the gas prices fixed in 2009 were valid for a period of five years, the EGoM said it has sought the advice of different ministries in the backdrop of huge outgo of foreign exchange to import costly LNG to bridge domestic gas shortfall.
RIL has told the petroleum ministry that the gas pricing should be such that it should ensure a level-playing field for domestic producers. It also stated that higher prices of imported LNG compared to domestic gas was resulting in the transfer of wealth to foreign countries.
According to RIL, gas produced from KG D6 was priced competitively in 2007 (with production beginning 2009). However, in comparison to 2007 prices, the current price of gas is "sub-market and inconsistent with prices set forth in the Production Sharing Contract", which is enabling third parties to benefit from the pricing policy.