RIL may be allowed to raise gas prices

Oil minister confident of securing bank guarantees from RIL; matter to be settled in 15 days 

 

Oil minister Veerappa Moily. Photo: Pradeep Gaur/Mint

 

Mumbai: Reliance Industries Ltd (RIL) may finally get its way and be allowed by the government to increase the price of gas from its D-6 block in the Krishna-Godavari basin from 1 April, after petroleum minister Veerappa Moily said on Tuesday that he is confident of securing bank guarantees from the company for a potential settlement of any claims that arise from the shortfall so far in the supply of gas.

In June, India approved a move to higher, market-related rates for locally produced gas from April 2014, but the finance ministry later said prices should be capped because the company’s gas production from the offshore D6 block was far below its supply commitment.

RIL, which operates the D6 block off India’s eastern coast, has reported a sharp decline in gas output since 2010. RIL and partner BP Plc. have cited geological complexities for the fall in output, but the oil regulator believes they failed to drill enough wells.

Falling output has already prompted the government to disallow proportionate cost recovery to RIL, leading to arbitration proceedings over the issue.

“They have come forward with the proposal for bank guarantees. There are some arbitration proceedings pending. Till that is settled, they will submit bank guarantees,” Moily said at an industry event on Tuesday in Mumbai.

He added that a proposal would be put before the Union cabinet on this and the matter resolved in the next 15 days

NITESH KUMAR

PGDM 1ST

LIVEMINT.COM