The gas price controversy seems to be escalating further with the both the Ambani group companies raising the pitch ahead of the next meeting of the empowered group of ministers.
Mukesh Ambani-controlled Reliance Industries Ltd (RIL) has warned that fresh bidding for the price of natural gas produced from the Krishna Godavari’s-D6 fields could lead to market distortion and cartelisation.
Anil Ambani-controlled Reliance Energy Ltd (REL) reacted strongly and accused RIL of holding power and fertiliser sectors to “ransom” by demanding an artificially inflated price for natural gas.
“The bidding process followed by RIL (that discovered the gas price of $4.33 per million British thermal unit) was a transparent and legally-complete process in line with the provisions of the Production Sharing Contract,” RIL President & CEO, petroleum, PMS Prasad wrote to Petroleum Secretary MS Srinivasan.
Seeking of fresh bids would result in “market distortion and potential cartelisation as bidding would be now done under a pre-conceived allocation mechanism under a so called utilisation policy,” Prasad said.
REL Director JP Chalasani said, “It is shocking that RIL, a private sector monopoly producer of gas, is raising the bogey of cartelisation, to prevent a transparent rebidding process.”
“In case the government does declare a policy on allocation for certain sectors or companies, it would lead to cartelisation by parties and not constitute a process of arms-length price discovery in as much as the price that the favoured allottees of gas would be willing to pay would never be reflective of true market price,” Prasad said.
RIL followed the petroleum ministry’s guidelines for arms-length transaction by discovering price “through competitive bidding between non-affiliates.” he added. “The demand now that petroleum ministry formulate a policy on utilisation is not to fill a so-called existing policy gap but to reverse a well deliberated policy that has had the sanction of different governments in the past,” he said.