Moily pulls Reddy note against KG price hike
If the latest RIL proposal is accepted, the price of domestic gas at current LNG spot rates will be close to $12 per mmBtu. Such a hike in price could jack up the cost of gas-based power and fertilisers considerably, although the new price is meant to be effective post 2014.
The Rangarajan panel set up to decide on future gas pricing and production sharing contracts is expected to submit its report next month. “Gas production from the KG-D6 block is shrinking continuously and we need to see how allocation in this constrained environment could be worked out,” said an oil ministry source.
In a recent letter to C Rangarajan, RIL executive director PMS Prasad sought market-linked pricing for natural gas and said this was critical for increasing domestic production.
The output from the KG D6 field is constantly declining. At present, the output stands at around 30 mmscmd and could fall further to 20 mmscmd by 2014.
Reddy had also sought to disallow $1-billion capital expenditure recovered by the company which, if accepted, would have inflated its profits from the KG D6 block by $2.2 billion as per an investment multiple ratio agreed to by the government earlier. The matter is now under arbitration.
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