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Updated: April 1, 2014 01:30 IST

RIL to continue gas supply on existing terms as interim measure

Special Correspondent
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A view of Reliance KG D6.
The Hindu A view of Reliance KG D6.

Australian Supreme Court judge appointed as third arbitrator

After a marathon day-long meeting in New Delhi on Monday, Reliance Industries Ltd (RIL) and companies from the fertiliser industry agreed to continue their gas contracts on existing terms until a new agreement is negotiated.The existing Gas Sales Purchase Agreements (GSPA) that ended on Monday night provided for supply of gas by RIL at $4.20 per million British thermal unit (mmBtu) and with the absence of a government notification on the new gas price, both sides temporarily agreed for the continuance of the old rate, officials involved in the discussion said.

The new gas pricing, as per the Rangarajan Committee’s formula, was to come into effect from April 1, 2014, but it was postponed following a directive from the Election Commission due to enforcement of model code of conduct.

The gas price from KG Basin fields was to increase from $4.20 mmBtu to nearly $8.40 mmBtu from April 1, 2014, onwards and this was cleared by the Cabinet. The existing contracts have been extended until the new pricing comes into effect, possibly after the formation of a new government at the Centre in June, 2014. Reportedly, RIL had been insisting that the procurers must sign the agreement at $8.40 per mmBtu, but it later relented.

The GSPAs that expired on Monday were signed in 2009 for a five-year period. There were 50 GSPAs, including 16 with fertilizer companies, 28 with power companies and the rest with city gas distributors.

In another development, the Supreme Court of India, on Monday, appointed former Australian Supreme Court judge James Spigelman as the third presiding arbitrator to resolve the dispute between RIL and the Ministry of Petroleum & Natural Gas over the falling output from KG-D6 gas fields. The appointment of the third arbitrator from outside India has been done following a demand from RIL which has two foreign partners at the KG fields.

Earlier, the Central Government had appointed former Supreme Court judge V. N. Khare as arbitrator while RIL had appointed former Supreme Court judge S. P. Bharucha as its arbitrator. The arbitration has been in limbo for over a year.

The disputes arose following drastic depletion in gas output from RIL’s gas fields in the KG basin.

While the Ministry of Petroleum & Natural Gas had accused RIL of hoarding gas to sell at higher prices following price revision effective April 1, 2014, RIL has been insisting that the fall in output was due to geological problems.

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