In his last days at the Union petroleum ministry, S Jaipal Reddy had reiterated his opposition to a hike in the price of natural gas from the current $4.2 per unit at Reliance Industries’ KG-D6 block. If the company’s demand for price revision is accepted now, the exchequer could lose around $6 billion, Reddy said in a note prepared for the empowered group of ministers (EGoM) and a copy of which was sent to the attorney general (AG).
After India Against Corruption’s Arvind Kejriwal revealed this and posted purported copies of Reddy’s note dated October 10 on its website on Wednesday, RIL came out with a statement denying the allegations.
RIL said: “The statements made by IAC in the press conference today are devoid of any truth or substance whatsoever and are denied. The deep water exploration project in the KG-D6 basin has deployed the best technical resources and has been recognized by the oil and gas industry as one of the very best in its class. This project has added great economic value to the country and by all accounts is a project of which India can be justly proud.” The company added: “Irresponsible allegations made by IAC at the behest of vested interests without basic understanding of the complexities of a project of this nature do not merit a response.”
In 2007, an empowered group of ministers fixed KG gas price on the basis of crude oil price at that time. Even though the price is due for revision only in 2014, RIL wants it revised now in tune with international prices, which is more than two times higher.
That Reddy — who was shifted to the science and technology ministry in the recent Cabinet reshuffle — had resisted RIL’s demand even in his latest note could add fuel to the notion that the tiff with the country’s largest private entity did cost him his job. Reddy also sought to disallow $1 billion capital expenditure recovered by the company which, if accepted, would have inflated its profits from the block by $2.2 billion as per an investment multiple ratio agreed to by the government earlier. The matter is now under arbitration.
Reddy’s letter could make it difficult for new oil minister Veerappa Moily to take a different position on gas price as expected by the market and the company.
Sources said the ministry, under a new leadership, is unlikely to propose a revision