Fert, power units to shell out more for K-G D6 gas

Written by Sanjay Jog | Mumbai | Updated: Mar 8 2009, 04:27am hrs
Fertiliser and power companies receiving gas supply from Reliance Industries (RIL) K-G D6 basin would have to shell out more as the gas would be bought in US dollars and not rupee, according to the draft gas sales and purchase agreement (GSPA) forwarded by the RIL.

The empowered group of ministers (eGoM) allocated 14 mmsmd to fertiliser companies, 18 mmscmd to power entities and the remaining for certain other priority sectors.

According to fertiliser units calculations, the total value of 14 mmscmd gas contract per annum (September 2007 exchange rate being 40.34) was Rs 861 crore. At the present rupee exchange rate, the total value of the contract per annum would go up to Rs 1,111.2 crore, an increase of Rs 250 crore.

Similarly, for power companies, the total value of 18 mmscmd contract per annum was Rs 1,107 crore in 2007. However, at current exchange rate, the total value of the contract per annum would go up to 1,428.67 crore, an increase of Rs 321.63 crore.

FE had on Thursday reported that fertiliser companies have objected to several clauses, including purchasing the gas price in dollars, in GSPA draft.

According to sources, in September 2007, the empowered group of ministers (eGoM) led by external affairs minister Pranab Mukherjee approved the gas price formula/basis, which denominates the gas price in US dollars for KG-DWN-98/3. The approved price of natural gas to be supplied was $4.2 per million British thermal unit (mmbtu). It is interesting to note that RIL had asked for a price formula in rupees but the eGOM approved it in US dollar. Hence, given the exchange rate variation, consumers would now have to pay 30% more for K-G D6 gas.