The finance ministry has given an in-principle nod to an oil ministry proposal to allow Reliance Industries (RIL) to raise gas prices in line with the Rangarajan Committee formula from April, provided it gives a bank guarantee to cover for the liability in case gas-hoarding charges are proved.
According to sources, the finance ministry has sought to know if the government position on reasons for fall in gas output at KG-D6 will be diluted. It also wanted to know the proposed course of action in case Reliance Industries (RIL) does not comply with bank guarantees.
The bank guarantee will be equivalent to the incremental revenue that Reliance Industries will get from the new gas price. It will cover the difference between the current gas price of $ 4.2 and the new rate that will come into effect from April 1 as per the Rangarajan formula.
It will be encashed by the government if it is proved that the company hoarded gas or deliberately suppressed production at the main D1&D3 fields in the KG-D6 block. "We have received comments from the finance ministry (on the draft Cabinet note floated on the KG-D6 gas pricing issue)," oil secretary Vivek Rae said."The comments were received 2-3 days back. I don't know what they have said as I have not seen them yet," he said.
The arbitration, where RIL is opposing the government stand that non-drilling of committed wells led to 80% fall in output, might get extended for an indefinite period. RIL states that the fall in production is a result of geological complexities.
Gas output from the D1&D3 fields fell to 8.7 mmscmd this month from a peak of 54 mmscmd in March 2010.Output from the MA field in the KG-D6 block, too, has fallen over 62%.