Reliance Industries skids after India panel stalls gas price hike

Mar 25 2014, 16:36 IST
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The Election Commission gave no reason for its decision late on Monday. Reuters The Election Commission gave no reason for its decision late on Monday. Reuters
SummaryA price increase had been due to come into effect on April 1, just days before India starts voting in an election.

boost investment that will lead to higher output.

"A political party has written to the Election Commission (EC) to keep on hold a bona fide decision of the Union Cabinet on gas pricing. The party has a history of ill-informed diatribe," Reliance said in a statement issued on Sunday.

The company declined to comment after the Election Commission announced its decision late Monday.

HIGH DEMAND, LOW PRICE

Analysts noted that the cabinet approval was granted long before the election dates were announced, and some said the Commission's intervention could further undermine sentiment towards an energy sector that has struggled to attract investment.

The election commission can ask the government to put on hold any decision that comes into effect after announcement of the poll schedule if the move is seen influencing voters or benefitting any particular political party, but it did not explain its reasoning in this case.

In a letter to the petroleum ministry's secretary, the commission said it had decided the proposed price increase could be deferred, without elaborating.

In its statement on Sunday, Reliance said the government's decision to implement the new price from April 1 was part of a "contractual obligation", as current gas prices are valid until March 31.

Demand for gas in India far outstrips consumption and domestic supply, but the government has kept prices below global market levels for producers of fertilizer and electricity, which has deterred investment in domestic exploration and production.

India, the world's fourth-largest energy consumer, has few energy resources other than coal, which meets 56 percent of its energy needs. Oil, mostly imported, accounts for 26 percent.

Gas output from wells operated by Reliance and its partner BP off India's east coast, has fallen sharply since 2010. The companies say the decline in due to the geological complexity of the KG D6 block.

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