As the country prepares for a major hike in gas prices from April, Petroleum and Natural Gas Minister M. Veerappa Moily wrote to Prime Minister Manmohan Singh saying that the contract for KG-D6 gas fields with Reliance Industries Ltd (RIL) cannot be terminated pending arbitration on the issue of output lagging targets.

The letter comes in the backdrop of Aam Admi Party leader Arvind Kejriwal’s allegation that the Congress-led UPA’s fuel pricing policy benefitted Mukesh Ambani’s firm.

Mr. Moily defended the increase in gas prices on the ground that the project would become commercially unviable for companies. This in turn would lead to increase in subsidy bills as gas would have to be imported.

Mr. Moily said several gas fields of both the RIL and state-owned Oil and Natural Gas Corporation were economically unviable at the current rate of $4.2 per million British thermal unit or mmBtu.

Responding to Mr. Kejriwal’s allegations, Mr. Moily said public sector firms accountfor about 80 per cent of India’s gas production and will be the major beneficiary of gas rates going up to $8 mmBtu.

Unless massive investment and technology are infused in the upstream oil and gas exploration and production, domestic production would keep on dwindling, Mr. Moily said.

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