Less than three years after Reliance Industries Ltd. told the Supreme Court that the Krishna-Godavari basin gas is a “national resource” over which it had “no unfettered rights” in terms of price or quantity, and that it was “bound by the terms of the production sharing contract [PSC] and the policies and directions issued by the government from time to time,” the Mukesh Ambani-owned company has done a U-turn — serving a 90-day ultimatum on the Petroleum and Natural Gas Ministry to “amicably settle” a new gas price revising formula.
In 2009, when RIL did not want to supply gas at a previously agreed low price to NTPC and the Anil Ambani group, it took the plea that only the government had the right to decide at what price a “national resource” like natural gas could be sold. In the ‘Radia tapes' — recordings made by the IT Department of Niira Radia's conversations with journalists during that period — this is the line the former PR representative of RIL is heard pushing. But with that battle behind it and global gas prices spurting, the company now wants a say in the price-setting process.
In a letter sent to the Ministry and the Directorate-General of Hydrocarbons (DGH) earlier this month, RIL states: “The widely varying prices of natural gas in the country and the government's refusal to address such differential pricing creates a situation wherein … there exists a controversy, difference and/or disagreement between us and the government over pricing of natural gas and our fair rights to determine those in accordance with our PSC.” The letter is in reference to the PSC for block KG-DWN-98/3 off the coast of Andhra Pradesh.
The letter is in tune with a similar demand made by its newly acquired partner, BP Plc, whose CEO, Robert Dudley, had in September this year called upon the government to end control on gas pricing.
Interestingly, Communist Party of India (Marxist) MP Tapan Sen has charged RIL with deliberately scaling down production from the KG D6 gas blocks in order to force prices up. “It is expected of the contractor [RIL] handling the natural gas reserve to scale down the production of gas in KG D6 as pressure tactics for achieving premature price rise from the government,” he had written to Prime Minister Manmohan Singh earlier this month.
The current price of $4.20/mmbtu was fixed by the Empowered Group of Ministers in October 2010 and the next revision of gas prices is scheduled only for 2014.