FM favours RIL's gas price formula

Written by Agencies | New Delhi, August 30: | Updated: Aug 30 2007, 23:17pm hrs
Finance Minister P Chidambaram has favoured acceptance of the pricing formula proposed by Reliance Industries for natural gas to be produced from its eastern offshore KG-D6 block from July 2008.

Chidambaram earlier this week told the Empowered Group of Ministers, constituted to go into the issue, that Prime Minister's Economic Advisory Council after examining the price formula proposed by RIL suggested its acceptance as it was in line with international practice and the EGoM may, therefore, consider accepting it, sources close to the development said.

Mukesh Ambani's RIL has proposed to price natural gas from KG-D6 at 4.33 dollars per million British thermal unit, a rate that power and fertilizer units feel is "too high".

Chidambaram, sources said, wanted RIL to supply natural gas to sectors which EGoM prioritised at the approved price.

Cabinet Secretary K M Chandrasekhar, however, wanted gas utilization and pricing policies to be framed before approving a price for RIL gas.

Petroleum Ministry disagreed with Cabinet Secretary's conclusion. It said the reference to gas utilization policy in the Production Sharing Contracts signed for areas auctioned under New Exploration Licensing Policy, was only for reservoir management and extent of gas to be used in India or abroad.

Unlike crude oil discoveries, export of gas is permissible under the Parliament-approved NELP.

Suggesting taking opinion of Attorney General on the matter, the ministry said there was already an informal policy for allotment of gas to sectors like power and fertilizer and even RIL's proposal was for selling the entire gas to these.