- Despite being directed by the Cabinet to revise gas price from April 1, 2014 as per the Rangarajan committee formula, the govt has delayed it because of a directive of the Election Commission in view of model code of conduct.
- Even after the code of conduct was over, the Ministry of Petroleum and Natural Gas has indicated that gas prices would only be announced for second quarter and has been forcing them to sell the gas at $4.2 per million metric British thermal unit (mmBtu) resulting in a loss of Rs.300 crore per month to the govt.
- This has prompted Reliance Industries Ltd. (RIL), BP and NIKO, the contractors of KG-D6 block to issue a notice of international arbitration to the central govt to secure market gas prices as per the production sharing contract (PSC).
- The confusion over gas prices is likely to jeopardise their current and future investments, rendering them unable to sanction planned investments close to $4 billion this year.
- Delay the ability of parties to apprais and develop other significant discoveries made last year.
- Overall, the parties were planning to invest $8-10 billion in the next few years to significantly increase production from the KG-D6 block.
- The notice seeking implementation of “Domestic Natural Gas Pricing Guideline 2014” was served on May 9, 2014. RIL, BP and Niko said they would work with the government to achieve a prompt and efficient resolution of this dispute.
- Read at: http://www.thehindu.com/todays-paper/tp-business/ril-partners-issue-arbitration-notice-to-centre/article5997204.ece
Exams Perspective:
- Rangarajan committee formula on Gas Pricing
- Production Sharing Contract (PSC)
- KG D6 Block
- Domestic Natural Gas Pricing Guideline 2014