Why pay a higher price if RIL says cost of gas is $2.74/mbtu?

Petroleum Ministry disclosure to Parliament committee; Massive price hike proposed from next April

29-11-08 Andhra Pradesh, Rajahmundry-ONGC offshore platform in KG Basin near Vodalarevue in East Godavari District in Andhra Pradesh. Photo-Supplied.

In a disclosure that puts a question mark over the massive hike proposed in the price of gas from April 2014, the Petroleum Ministry has told the Standing Committee on Finance that the cost of production of gas in the KG D6 block, including levies, works out to $2.74 mbtu based on the financial statement of Mukesh Ambani-owned Reliance Industries Limited (RIL) for the year 2011-12.

The Petroleum Ministry gave this information while replying to a question by the Standing Committee on Finance on the cost. The Committee also wanted to know if the company had submitted any documentation in this regard to the Ministry.

In its reply dated August 2, 2013, the Petroleum Ministry stated: “RIL has not submitted the document to the Ministry about cost of production in the block KG-DWN-98/3. The cost of production for RIL in KG-D6 block in 2011-12 was $2.48 mbtu excluding levies and $2.74 mbtu including levies. Figures are computed from financial statements of 2011-12 based on projected levels of production.”

Stating that the latest reply of the Petroleum Ministry had raised several questions including that of connivance at government level to benefit a corporate house, CPI MP Gurudas Dasgupta, who had persistently raised the issue, demanded that the government should come clear on the issue of gas pricing. “I request you to re-visit the question of pricing of natural gas to be given to RIL and clear the air of suspicion that the government had only acted to benefit the corporate giant undermining national interest,” he wrote in a letter to Prime Minister Manmohan Singh.

In his letter, Mr. Dasgupta demanded that Dr. Singh explain how, when the cost of production stood at $2.74 mbtu, the Cabinet Committee on Economic Affairs, headed by him, approved an international pricing mechanism from April 2014 under the Rangarajan formula. “Evidently this is a case of lack of due diligence and I wonder how the Cabinet approved this price in a hurried manner despite protests from the important economic Ministries,” he added.

Published - August 23, 2013 11:18 pm IST