In what could spell trouble for Reliance Industries Ltd (RIL), the committee of secretaries (CoS) has concluded that the company?s pricing formula and the bidding process for gas sales from its D6 block in the K-G basin suffers from ?several infirmities?. Further, the CoS said, the formula should be considered for approval only after the government firmed up a gas utilisation and pricing policy.
The CoS asked the petroleum & natural gas ministry to evolve the two policies within a month in consultation with the main user ministries?power and fertilisers?and the Planning Commission. It would be subsequently taken up by an empowered group of ministers under Pranab Mukherjee and finally cleared by the cabinet committee on economic affairs.
In its report, a copy of which is available with FE, the CoS also said once the policies were in place, ?It would be useful if a neutral, independent body like the Prime Minister?s Economic Advisory Council (EAC) is also involved? in the process of determining whether the price has been arrived at in accordance with them.
RIL, however, counters that the government cannot move the goalposts seven years after the contracts have been signed.
As reported by FE on August 2, the CoS has also said that it may not be prudent to approve the formula until the Bombay High Court announces its verdict on the ongoing cases between RIL on the one hand and Anil Ambani?s RNRL and state-owned NTPC on the other.
The CoS also said the accountability of government representatives on the managing committees?which approve all major investment decisions?of oil and gas blocks allotted under the Nelp rounds needs to be improved since large amounts of government revenue in profit share are involved. ?Effective audit mechanisms through CAG or other reputed agencies would be useful,? it said.
On the cash or kind controversy on the government?s share of profit petroleum, the CoS has recommended taking it in cash for the next year as the government?s share was likely to be extremely small as the supplier would recover as much of the development cost as possible in the first year.