Gas production from Reliance Industries Ltd’s (RIL) KG D6 block in the Bay of Bengal has the potential to cut India’s import bill by 20%, or nearly Rs50,000 crore. RIL is currently producing around 40 million standard cu. m per day (mscmd) and says that although it can increase production to 60 mscmd immediately, it cannot because the government has still not provided it a list of companies that will get the additional gas. Edited excerpts from an interview with executive director P.M.S. Prasad:
Gas saga: RIL’s P.M.S. Prasad says that at a price of $4.2 mmBtu, the govt will make Rs80,000-85,000 crore over the life of the KG D6 field.
When are you going to hit the peak (production) of 80 mscmd?
We are ready to produce more than 60 mscmd and we are waiting for the government to give us more linkages to customers. Right now, they have given us linkages up to 40 mscmd. We have signed all agreements with NTPC. We are also almost delivering gas to people except one or two customers like Essar (Steel Ltd) and GAIL (India Ltd) who will be taking gas probably next week. Ratnagiri Gas and Power Pvt. Ltd (RGPPL), Dabhol, would start taking gas from 1 October. But otherwise we are almost there at 40 million. So, now we are eagerly waiting for the new eGoM (empowered group of ministers) to be formed so that the government can give us more linkages.
Is the government giving you a time frame? Do you lose money if you do not ramp up?
We do, a lot. The Rs35,000-36,000 crore that we have invested is Reliance’s money. It is Reliance shareholders’ money, the money that Reliance borrowed from the banks and if we are not able to earn revenues from these investments, it is a loss of present value.
One of the allegations is that you are deliberately not ramping up production, you are hoarding gas, you are artificially creating a scarcity. What are your thoughts on that?
I can only laugh because no one after having invested this much money would want to not produce. For the next five years, the gas price is fixed. So, how does it help me? Secondly, I have to repay my debt, so how does it help me not to get the revenues today. The only reason that we are not able to produce more is because of the procedural delays in forming the new eGoM and then giving us more allocations.
Because of what the government is not able to fast-track, you are not able to ramp up the capacity?
Absolutely. So on a lighter note, it is the government which is hoarding the gas, not Reliance.
The other thing which has gone against you in the recent few months has been the clarification that now the seven-year income tax holiday does not stand, what does that mean for you? What kind of a hit will you take?