Reliance seeks threefold hike in KG-D6 gas price
Amid the controversy over the pricing of gas at its KG-D6 block, Reliance Industries (RIL) has reiterated its demand for a steep hike in the price in a letter to the prime minister’s economic advisor C Rangarajan. Seeking what is called “import parity price” for domestically-produced gas, the country’s largest gas producer has told the Rangarajan committee reviewing the future production sharing contracts in the sector that the price could be equal to that of liquefied natural gas (LNG) imported from Qatar, exclusive of import taxes and re-gasification charges.
Put simply, this means that if RIL’s proposal is accepted, the price of domestic gas at current LNG spot rates will be close to $12 per mmBtu. This is about three times the $4.20 per mmBtu that RIL gets for its KG-D6 gas at present. Such a hike in price could jack up the cost of gas -based power and fertiliser considerably, although the new price is meant to be effective post 2014.
Of course, the actual price impact will hinge on the LNG market. Analysts, however, don’t see LNG prices coming down significantly in the near future.
RIL’s executive director PMS Prasad wrote to the Rangarajan panel on October 30: “Since domestic gas substitutes imports, the price of LNG imported reflects the price of gas consumers are willing to pay in the open market.”
Besides, he said, import-parity principles are used for all other oil products in the country and under the production-sharing contracts, oil and gas cannot be treated differently.
RIL’s production
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