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Government raises Rs 2,500 crore claim on RIL
NEW DELHI: The Centre has asked RIL and its partners to pay an additional $380 million (around Rs 2,500 crore) for failing to meet natural gas output targets from
NEW DELHI: The Centre has asked RIL and its partners to pay an additional $380 million (around Rs 2,500 crore) for failing to meet natural gas output targets from eastern offshore KG-D6 fields for 2014-15.
With this, the total dues from RIL for missing the target in five fiscal years beginning April 1, 2010, now stands at a cumulative $2.76 billion. The government is preventing the RIL-led consortium from recovering its costs, a dispute that started in 2011 and is now stuck in arbitration.
Gas output from Dhirubhai-1 and 3 gas fields in the eastern offshore KG-D6 block was supposed to be 80 million standard cubic metres per day, but actual production was only 35.33 unit (mmscmd) in 2011-12, 20.88 units in 2012-13 and 9.77 units in 2013-14. The annual output has been around 8 units in subsequent years.
The Production Sharing Contract (PSC) allows RIL and its partners BP Plc of the UK and Canada’s Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing petroleum profit and royalty with the government.
“The disallowed costs have to be paid to the government,” government sources explained.
“On June 3, 2016, the company (RIL) received a revised claim up to year 2014-15 with a disallowance of $2.756 billion on cumulative basis and consequent demand of government share of additional profit petroleum of $246.9 million, also on cumulative basis,” RIL said in a filing to the regulators.
The government had for 2010-11 disallowed $457 million of cost, $548 million for 2011-12, $792 million for 2012-13 and $579 million for 2013-14. Now $380 million has been added for 2014-15.
The output was behind target in 2015-16 as well and the government is yet to issue a cost disallowance notice for this.
Sources say that the oil major is unlikely to pay any of these dues before the arbitration ends.
“Every year, based on its own interpretations of the PSC and assumptions (with which the contractor group does not agree), the ministry of petroleum and natural gas revises the total cost it proposes to disallow and consequently aggregates the figure with figures of the previous years.
The government in 2011 had clarified before a parliamentary panel the PSC does not provide for penalty.
The CAG had in 2011 observed that the profit sharing formula between the government and the company could lead to front-loading of expenditure, which would result in delayed payment of profit to the government.
The government recently changed the profit sharing formula due to continued criticism.
