The Empowered Group of Ministers (EGoM) on Monday failed to reconcile the sharp inter-ministerial differences on the price of gas to be sold by Reliance Industries Ltd (RIL) from its D6 gas field in the Krishna-Godavari basin. The ministerial group will resume its discussions on Tuesday to hammer out a consensus on a suitable pricing policy for the various stakeholders.
?The meeting was inconclusive. We will meet again tomorrow,? petroleum minister Murli Deora told reporters after the meeting. The EGoM, headed by external affairs minister Pranab Mukherjee, has to decide on the price and utilisation of the gas based on inputs received from reports by the cabinet secretary and the Prime Minister?s Economic Advisory Council.
The power and fertiliser ministries apparently favour recommendations made by the two reports relating to the lack of transparency in the bidding process by RIL, as also corrective actions in the gas pricing formula. But the petroleum ministry has expressed reservations over those recommendations.
Sources said the petroleum ministry asked the EGoM to honour the commitment given under the New Exploration Licensing Policy (Nelp) of marketing freedom at market determined pricing, as any kind of regulation would send wrong signals to investors. It thus supported RIL?s proposed price of $4.33 per million British thermal unit, as it was lower than the market price of $4.75-5.7 per mBtu.
The petroleum ministry has argued that the government has no role in fixing the gas price or use of gas produced from areas auctioned since 2000 to companies like RIL. Deora told the group of ministers that the government should not try to bring back regulation in the sector.
The ministry has also held the view that under the production sharing contracts signed with firms like RIL for areas auctioned under the Nelp, the government has the right to only approve the gas formula and cannot fix a particular price.
Sources said the petroleum ministry also told the EGoM that the government approving a price higher than the $3.18 per mBtu which RIL had bid in an NTPC tender in 2004 would not impinge on the state-run firm’s legal battle with the Mukesh Ambani company to enforce the bid. The government can approve different prices for gas under Nelp, depending upon when the proposal is approved.