in its Eastern offshore KG-D6 block.
It will cover the difference between the current gas price of USD 4.2 per million British thermal units and the proposed new rate of USD 8.4 per million Btu.
The ministry had earlier proposed that RIL should be forced to sell gas from the D1&D3 fields at the current rate until it is proved that the 80 per cent fall in output was due to natural reasons or it makes up for the shortfall in production since 2010-11.
The penalty in the form of the lower gas price would have been the second imposed by the ministry on RIL for falling short of the stated production targets. It had already levied a USD 1.8 billion penalty for the output drop and the issue is before arbitration.
Gas production from the D1&D3 fields has fallen to less than 10 million standard cubic metres per day from the peak of 54 mmscmd in March 2010.
Production has been lower than the target since the latter half of the 2010-11 fiscal and it should currently have been 80 mmscmd, as per the 2006 investment plan.
Output from the MA oil and gas field in the KG-D6 block too has fallen by over 62 per cent.
However, the ministry and the oil regulator – Directorate General of Hydrocarbons - have agreed with RIL's reasoning of geological complexity being responsible for the drop and has approved the higher price for the MA field's output.
Reliance may win India gas price hike with financial guarantees
(Reuters) Reliance Industries may be allowed to hike rates for its gas from April after it offered financial guarantees to the government to settle any claims against it over a shortfall in its gas output, the oil minister said.
In June, India approved a move to higher, market-related rates for locally-produced gas from April 2014, but the finance ministry later said prices for Reliance should be capped because the company's gas production from the offshore D6 block was far below its supply commitment.
Reliance, which operates the D6 block off India's eastern coast, has reported a sharp decline in gas output since 2010. Reliance and