Reliance Industries might be having the last laugh in raising the price for KG D6 gas. A CNBC TV18 exclusive reports that law ministry has given nod for the price hike.
The law ministry has reportedly concluded that RIL can raise prices even before 2014 if both the government and RIL agree. Sources told CNBC-TV18 that the oil ministry has just received the law ministry’s conclusion. It will take up the opinion when the empowered group of ministers (EGoM) meet.
In January, RIL wrote to the oil ministry and the Prime Minister’s Office seeking a price revision, saying that the current price was “sub-market” compared with three times the higher price being paid for imported gas (LNG).
The EGoM had noted in February “that there is a wide divergence between the domestic and international prices of gas and the import of natural gas at a high price to meet the domestic shortfall adversely impacts the current account balance”. It had asked the Oil Ministry to seek views of Attorney General of India on reopening of KG-D6 price which was in 2007 fixed at $4.2 per mBtu for five years of production ending March 31, 2014.
Even the power producers have been against any hike. The Association of Power Producers (APP), whose members include Anil Ambani Group firm Reliance Power and Tata Power, on March 7 wrote to Oil Minister S Jaipal Reddy saying domestic natural gas prices should not be increased above current rate saying the cost of electricity will rise by 50 paise per unit for every dollar increase in gas price.
Given the poor condition of the power sector and heavy losses of the state distribution units, it might be difficult to convince the government about the price hike.