By IANS
Mumbai : The ongoing controversy over the pricing of gas by Reliance Industries Ltd (RIL) has taken a new turn with the high-powered Committee of Secretaries (COS), constituted by Prime Minister Manmohan Singh, submitting its report on the issue.
In its report to the Prime Minister’s Office (PMO), the COS, headed by Cabinet Secretary K.M. Chandrasekhar, has expressed serious reservations over the gas pricing formula submitted by Mukesh Ambani-owned Reliance Industries Ltd (RIL).
It may be recalled that RIL had approached the ministry of petroleum and natural gas May 18 for approval of a new gas pricing formula, with envisaged a minimum gas price of $4.64 per mmbtu.
“The gas pricing formula submitted by RIL suffers from several infirmities in respect of both, the formula employed and the bidding process,” said the report, a copy of which is with IANS.
Expressing its reservations, the COS has said that the gas pricing formula submitted by RIL to the government “is not based on the competitive market environment and unfairly exploits a situation of stranded assets of the major consuming sectors”.
It goes on to argue that it will not be prudent for the government to approve RIL’s pricing formula at this stage, in view of the pending court cases against RIL on the quantity of available gas.
Calling for the formulation of a gas pricing policy, the report warned that if the government approves RIL’s gas pricing formula, it will be detrimental to the interests of the National Thermal Power Corp (NTPC) and will weaken NTPC’s case against RIL.
RIL is embroiled in a legal battle with NTPC and the Anil Ambani-controlled Reliance Natural Resources (RNRL), both of which have alleged that RIL is seeking to renege on its binding commitments to supply gas to them.
The Bombay High Court, in its order June 20, has prevented RIL from creating any third party interest in its gas from the D6 block in the KG basin as the peak production of 80 mmcmd of gas is locked up with NTPC, RNRL and for RIL’s captive use.
The court had said NTPC would get first right to 12 mmcmd gas from the block, while RNRL would get the right to the next 28 mmcmd of gas. The court had also marked 25 mmcmd of gas for RIL’s captive use.
RNRL has the right to an additional 16 mmcmd of the gas, thus locking up the entire 80 mmcmd of KG basin gas.
The COS report said that in view of the pending court cases against RIL on the quantity of available gas, it would not be prudent for the government to approve RIL’s pricing formula at this stage.
The COS report has suggested that RIL’s formula could be taken up only after a gas pricing policy is put into place which, it said, was overdue by more than six years.
Accordingly, the COS has suggested that the ministry of petroleum and natural gas must first draft a transparent gas utilization and pricing policy in consultation with all stake holders such as ministry of power, ministry of fertilizer and the Planning Commission.