Gas pricing: RIL writes to Rangarajan panel, refuting Reddy's claims

Reliance Industries has said subsidies are extraneous to the production sharing contract signed by the government with the company, in effect rebutting former Oil Minister Jaipal Reddy’s claims that a higher gas price will result in an increase in subsidy outgo for the government, CNBC TV18 exclusively reported today quoting sources.

The company has written a letter to this effect to the C Rangarajan panel, which is set up to decide on the future gas pricing and production sharing contracts, CNBC TV18 said. The ministry had in September said an increase in price by $1/mmBtu for 1 mmscmd of gas will increase the government’s subsidy burden by about Rs 64 crore annually, according to a report in the Business Line.

[caption id=“attachment_525266” align=“alignleft” width=“380”]  The company had asked the government to increase the prices of its gas from KG D6 to $12.93 per mmBtu from the present $4.2 per mmBtu. Reuters[/caption]

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The company had asked the government to increase the prices of its gas from KG D6 to $12.93 per mmBtu from the present $4.2 per mmBtu.

In the letter, the company has also said that the government is not entitled to regulate gas prices as this goes against production sharing contracts, National Exploration Licensing Policy and Supreme Court’s order in RIL vs Reliance Natural Resources case, the CNBC TV18 report said.

The Supreme court had in the RIL-RNRL case said gas price needs to be market aligned and asked the government to revise gas price if it is below the market rate, the RIL has said in the letter. The company has said it has 5.5 tcf of gas and quoted a price upwards of $10/mmBtu.

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RIL has written this letter after the recent cabinet reshuffle that saw Reddy being shunted out from the oil ministry to science and technology ministry. Veerappa Moily succeeded Reddy as the oil minister.

The change had created much furore after anti-corruption activist Arvind Kejriwal alleged that Reddy was removed at the behest of RIL.