New panel on gas allocation to look into govt control

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Mumbai: A new committee on gas allocation, expected to be set up soon by the Centre, will look into the crucial issue of whether the government will have any control in the allocation of its own resources.

This is necessitated in the wake of Bombay High Court’s June 15 order asking RIL to supply K-G D6 gas of 28 mmscmd to RNRL at $2.34 per mmbtu for 17 years. The relevant content of MoU on gas supply, which has been reproduced in the judgment, allocates all gas to be produced from the RIL operated blocks between the companies of two brothers. Even the NTPC quantity of 12 mmscmd, also in the Bombay High Court, as per the family MoU, will go to ADAG if the deal with NTPC does not materialise. The committee may include finance minister, petroleum minister, power minister and law minister.

Sources told FE that the judgment raises a fundamental question whether the government’s gas utilisation policy should or should not take precedence over the MoU. Besides, the Centre is planning to expand gas grid including regions with no gas access.

Moreover, the Petroleum and Natural Gas Regulatory Board (PNGRB) and the Centre propose to expand CGD networks across India. The committee may analyse how would the Centre do if it has no control on allocation of its own resources in the wake of court order. All agreements, in private and public domain, are subject to the laws, government policy and regulations. The Bombay High Court judgment allows supply of gas at a fixed price for 17 years without taking into account the government policy.

Interestingly, Alchemy in its analysis has observed that it is not clear whether RIL has to pay the government a share of petroleum profit at $4.2/mmbtu or at the court directed price of $2.34 per mmbtu. According to MoU entered between the two Ambani brothers, RNRL is supposed to get additional volumes equivalent to 40% of incremental production beyond 0 mmscmd. What happens to additional 40 mmscmd production is not clear.