Reliance Industries Limited (RIL) may finally get to price majority of its gas at $3.6-3.7 per million british thermal unit (mmbtu), which is a substantial correction when compared with RIL?s proposed price of $4.33 per mmbtu.
As 70% of the country?s gas consumption is by the power and fertiliser sectors, the obvious beneficiaries of this price will be the core sector industries. The aggregate volume demanded by the power and fertiliser companies, under the bids invited by RIL, was around 23 mmscmd.
In addition, RIL will also sell its gas to other industries besides meeting its own captive requirements. This gas, sources said, will be at a comparatively higher price. Under the provisions of the production-sharing contract (PSC), it will be the higher price, which would be used to determine the valuation of government?s share of profit petroleum.
Significantly, sources said that the RIL?s pricing formula will be denominated in dollars and not in rupees as was proposed earlier.
Highly placed government sources told FE that the new price is the result of changes proposed in RIL?s price formula by a high-powered group comprising of the cabinet secretary KM Chandrasekhran besides secretaries from the ministries of finance and petroleum along with the officials of the Economic Advisory Council. The group will submit its workings to the Empowered Group of Ministers (EGoM) at its next meeting, expected to happen any day.
Sources said the deliberations of the group were restricted purely to the pricing formula without getting into the allocation of gas, as this will hinder the contractor?s freedom to market its gas.. Even the PSC requires the government to approve the basis or formula for the market price quoted by the gas company.
While it seems to be a win-win for the government, as on one hand it has been able to secure a cheaper price for the core sector and on the other it will get the valuation of its profit petroleum at a higher price, this may have legal implications especially from contractors of the NELP blocks.
Meanwhile, the price of gas committed by RIL to NTPC has not been discussed following the ongoing legal proceedings between RIL and NTPC in the Mumbai High Court.