Mukesh Ambani-owned Reliance Industries Limited (RIL) has served a 90-day ultimatum on the Petroleum and Natural Gas Ministry to amicably settle the price revision formula for natural gas “in accordance” with the norms under the production sharing contract (PSC).
In a letter to the Petroleum and Natural Gas Ministry and the Directorate-General of Hydrocarbons (DGH), RIL has stated that “the widely varying prices of natural gas in the country and the Government's refusal to address such differential pricing create a situation wherein, we respectfully submit, 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. This demand is in tune with a similar demand made by its newly acquired partners, BP plc, whose CEO Robert Dudley, had, in September last, called upon the Government to end control on pricing of gas. Interestingly, Communist Party of India (Marists) Rajya Sabha member Tapan Sen had charged RIL with deliberately scaling down production from the KG D6 gas blocks in order to pressurise the government to revise natural gas prices. Interestingly, the next revision of gas price by the EGoM is scheduled for 2014. The current price of $4.20 /mBtu was fixed by the EGoM in October 2010. In its January 6 letter, RIL stated that “as such we wish to exercise our contractual right to market natural gas on the basis of arms length competitive sales to the benefit of all parties to the PSC, including Union Government. We understand from public and private statements that there are some who believe the current sub-market price should be maintained. We, therefore, propose discussing with you a revised price formula consistent with Article 21.8 of the PSC and principles established by the NELP and the Petroleum Ministry with a view to reaching an amicable settlement within 90 days of the date of this letter.”