It never struck anyone as odd that though the Rangarajan formula on raising gas prices was submitted way back in December 2012, it took till the middle of 2013 for the Cabinet to clear it. Which you could still argue was okay, because the new round of bidding for NELP rounds wasn’t due till January or February 2014—though, since investors need time to decide on investments, it would be better if the government didn’t leave things for the last moment. In the event, that is precisely what happened, and the final notification was made only in January 2014. The NELP auctions, by then, had been postponed because several other necessary clearances couldn’t be got. The issue of what to do with Reliance Industries Ltd’s D1/D3 block was also sorted out, and the notification said the Rangarajan-based prices would be applicable to these fields as well, subject to RIL giving a bank guarantee. Since there was an allegation, and this was the subject of an arbitration, RIL was to provide a bank guarantee for the difference in the new and old prices for the gas it produced, since the arbitration could go either way.
But, and here’s where the oil ministry’s babus are getting painfully technical, if RIL is to provide the bank guarantee, and it owns just a 60% share in the block, why shouldn’t the new prices apply to just 60% of the production—that is, while RIL can be given, say, $8 per mmBtu for 60% of the production from its D1/D3 blocks in the KG Basin, this cannot be allowed for the 40% of the field owned by British Petroleum and Niko. Why? Because, the oil ministry babus are arguing, the bank guarantee can be provided only by RIL since it alone has filed an arbitration case against the government. But RIL’s bank guarantee, and the arbitration case, is on behalf of all partners, not RIL alone. But try explaining that to babus who are immersed deeply in meaningless technicalities. It is a good thing petroleum minister Veerappa Moily has said it is a technical issue, and will be sorted out soon. Meanwhile, investors see this as yet another example of a government that is not fully committed to allowing investors in.