RIL shares surge nearly 5% as CCEA allows gas price hike

Shares of Reliance Industries on Friday surged nearly 5 per cent after the Cabinet decided to allow the energy major to double the price of natural gas from April.

This was subject to the firm furnishing a bank guarantee to cover its liability if gas hoarding charges against it are proved.

After surging 4.93 per cent to Rs. 896.70 in intra-day trade, the heavy-weight stock finally ended at Rs. 893.65, up 4.58 per cent from its previous close at the BSE. On the NSE, the stock jumped 4.82 per cent to Rs 895.25.

The scrip was the top gainer among the blue-chips on both Sensex and Nifty. Surge in the bellwether stock was significant in pushing the Sensex 371.10 points or 1.79 per cent higher to finish at 21,079.72, as RIL alone contributed 81.37 points in the overall market gain.

The bank guarantee, which will be equivalent to the incremental revenue that RIL will get from the new gas price, will be encashed if it is proved the company hoarded gas or deliberately suppressed production at the main Dhirubhai-1 and 3 (D1&D3) fields in the eastern offshore KG-D6 block since 2010-11.

The Cabinet Committee on Economic Affairs (CCEA) decided that the “contractor (RIL) will be allowed to sell natural gas from D1&D3 at revised price from April 1, 2014. The sale will be permitted on the basis of a bank guarantee to be furnished by RIL in favour of the Government for the incremental gas rate,” Oil Minister M Veerappa Moily had said on Thursday.

The CCEA headed by Prime Minister Manmohan Singh decided there will be no change in the Rangarajan formula of pricing domestically produced gas — both conventional and non-conventional fuels such as coal-bed methane and shale gas — at an average of international gas hub rates and the cost of liquefied natural gas (LNG) imported into India.