Reliance Industries shares gain after govt allows gas price hikes

Dec 20 2013, 13:17 IST
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Cabinet Committee on Economic Affairs has resolved to allow Reliance Industries to price gas from the KG-D6 field from April 1 next year. Cabinet Committee on Economic Affairs has resolved to allow Reliance Industries to price gas from the KG-D6 field from April 1 next year.
SummaryCCEA resolved to allow RIL to price gas as per the Rangarajan formula from April 1 next year.

Shares in Reliance Industries (RIL) today rose by nearly 3 per cent after the Cabinet decided to allow the energy major to double the price of natural gas from April.

This was subject to the firm furnishing a bank guarantee to cover its liability if gas hoarding charges against it are proved.

RIL's stock rose by 2.74 per cent to Rs 878 on the BSE. On the NSE, the scrip gained 2.92 per cent to Rs 879.

Reliance can charge higher price for gas with bank guarantee

The bank guarantee, which will be equivalent to the incremental revenue that RIL will get from the new gas price, will be encashed if it is proved the company hoarded gas or deliberately suppressed production at the main Dhirubhai-1 and 3 (D1&D3) fields in the eastern offshore KG-D6 block since 2010-11.

The Cabinet Committee on Economic Affairs (CCEA) decided that the "contractor (RIL) will be allowed to sell natural gas from D1&D3 at revised price from April 1, 2014. The sale will be permitted on the basis of a bank guarantee to be furnished by RIL in favour of the Government for the incremental gas rate," Oil Minister M Veerappa Moily had said yesterday.

The CCEA headed by Prime Minister Manmohan Singh decided there will be no change in the Rangarajan formula of pricing domestically produced gas - both conventional and non-conventional fuels such as coal-bed methane and shale gas – at an average of international gas hub rates and the cost of liquefied natural gas (LNG) imported into India.

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