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Oil ministry against gas price revision before April 2014

business Updated: Oct 08, 2012 01:13 IST
Anupama Airy
Mukesh Ambani

In a big blow to Mukesh Ambani-led Reliance Industries Ltd (RIL), the petroleum ministry has rejected any immediate revision in gas price before April 2014. RIL has sought more than a three-time increase in the price of natural gas being produced from its KG-D6 field on the eastern coast, India’s largest gas field.

The petroleum ministry has mad this observation in a “secret” note to AK Antony-headed empowered group of ministers (EGoM) on gas pricing.

RIL, in its proposal to the ministry, had sought an increase in the price of KG-D6 gas from the existing $4.2 a unit to over $14 a unit — a rise by $10 a unit. The increase in gas price would have resulted in a $8.5-billion (Rs. 44,200-crore) increase in revenues to RIL in the next two years while increasing government’s revenues by $1.4 billion (Rs. 7,280 crore).

The note observed that as most of the gas produced (from RIL’s KG-D6 block) is being used by fertiliser plants as well as power units supplying electricity to state distribution companies, the burden on state and central governments will go up by $10.5 billion (Rs. 54,600 crore) due to the increase in domestic gas price.http://www.hindustantimes.com/Images/popup/2012/10/08-10-12-biz-02.jpg

The note also acknowledged that as gas production from the block is dwindling (at 25 mmscmd in 2012-13 and 18.7 mmscmd in 2013-14), the government will have to fork out an additional subsidy burden of $6.3 billion.

“The price increase will result in huge financial burden on the government,” said the note, a copy of which is available with HT.

When contacted, an RIL spokesperson refused to comment.

“The petroleum ministry opines that revision of natural gas pricing is not appropriate before April, 2014,” the note said.