RIL to sell gas from KG-D6 to fertiliser units at $4.2 till new contract is signed

Written by fe Bureau | New Delhi | Updated: Apr 2 2014, 05:22am hrs
Reliance Industries has agreed to extend the existing gas sale and purchase agreement (GSPA) with fertiliser units and supply gas to them at the present price of $4.2/mmbtu till a new contract is signed.

On March 24, the election commission deferred the implementation of new gas price regime based on the Rangarajan formula from April 1. All these fertiliser companies were expected to sign new contracts based on the new price. However, after the commission deferred the implementation of new regime, both the buyers and seller (RIL) were left high and dry. Reliance Industries signed GSPAs with 16 fertiliser units for sale of gas from KG-D6 in 2009. The GSPAs were to expire on March 31.

Reliance will continue to supply gas to the fertiliser firms at $4.2/mmbtu till the time the new GSPA is signed, fertiliser secretary Shaktikanta Das said after the meeting Reliance and fertiliser association officials.

The fertiliser companies rejected the draft gas sale purchase agreement (GSPA) put forward by Reliance Industries (RIL) as the companies were not satisfied with the terms of the contract. The tenure of the proposed draft GSPA by RIL is only for one quarter up to June 30 and further extension is on a quarter-to-quarter basis at the discretion of sellers. The draft GSPA also proposes a marketing margin of $0.135/million metric British thermal units (mmBtu) to be levied on a gross calorific value instead of current net calorific value, which would effectively increase gas margins by 11%.

The Fertilizer Association of India (FAI) has requested for a 'model GSPA' that is finalized by the petroleum ministry and uniformly signed by all the fertilizer firms that get an allocation of gas.

The price of urea, the most widely used fertiliser, is highly subsidised and fixed by the government. The last major revision was on April 1, 2010, when the price was increased to Rs 5,310 per tonne from Rs 4,830. In October 2012, the price was marginally hiked by Rs 50 to Rs 5,360 a tonne.