Parliament’s Standing Committee on Finance has ordered a comprehensive study into allegations that Reliance Industries Limited may have deliberately scaled back production of gas from fields in the Krishna-Godavari basin, a highly-placed source in the body has told The Hindu. The Finance Ministry has been given time till November 24 to estimate losses to the exchequer caused by Reliance’s under-production.
A first of its kind ever initiated by a parliamentary standing committee, the study was ordered on November 9, based on a note submitted by Communist Party of India MP Gurudas Dasgupta. The note demands that the Finance Ministry issue a note to Reliance demanding payment of $1.7 billion to compensate for costs that will be imposed on the exchequer in 2012-2013 because of the shortfall in production.
Mr. Dasgupta’s note estimates that replacing cheap domestic gas from the Krishna-Godavari fields with imported gas will cost some ₹ 43,000 crore in 2012-2013, and another ₹ 48,000 crore in 2013-2014.
The Standing Committee’s action comes less than a fortnight after anti-corruption campaigner Arvind Kejriwal accused Reliance of blackmailing the government into raising natural gas prices by scaling back production in the Krishna-Godavari fields.
RIL has denied the allegations, saying the shortfall in production has been caused by technical issues, including sand and water ingress into two wells. Last month, the government approved a plan intended to address these issues. The company did not, however, respond to The Hindu’s request for comment on the Standing Committee-directed study.
Mr. Kejriwal alleged that S. Jaipal Reddy was replaced as Petroleum Minister by M. Veerappa Moily to “increase gas prices from $4.2 per mmBtu [million metric British thermal units] to $14.2 mmBtu.” “It appears that Mukesh Ambani and not the Prime Minister runs the country,” he added.
The government has so far imposed fines of $1 billion to compensate it for losses incurred. However, no similar notice seeking fines has been issued for 2012-2013 — even though Reliance has admitted that its gas production will reach only 1.847 trillion cubic feet, against a target of 2.957 trillion cubic feet.
Finance Secretary R.S. Gujral and Revenue Secretary Sumit Bose, the source said, told the MPs they were unaware of these issues, leading the Standing Committee to order the study.
Mr. Bose’s office did not respond to a request seeking comment.