Govt says no to RIL gas field nationalization

Govt says no to RIL gas field nationalization
PTI
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First Published: Fri, Aug 07 2009. 12 42 AM IST

Gas row: Oil minister Murli Deora said the government would make every effort to protect its legal rights to regulate the gas utilization. AP
Gas row: Oil minister Murli Deora said the government would make every effort to protect its legal rights to regulate the gas utilization. AP
Updated: Fri, Aug 07 2009. 12 42 AM IST
New Delhi: India’s lawmakers on Thursday demanded that an offshore gas field of Mukesh Ambani-led Reliance Industries Ltd (RIL) be nationalized, but the government turned it down.
Members of Parliament expressed concern in the Rajya Sabha over the dispute between RIL and Reliance Natural Resources Ltd (RNRL), controlled by Anil Ambani, and said RIL should not be allowed to enter into an agreement to distribute natural gas from a national asset.
Gas row: Oil minister Murli Deora said the government would make every effort to protect its legal rights to regulate the gas utilization. AP
The “old days of nationalization are gone”, oil minister Murli Deora said, responding to the debate initiated by Tapan Kumar Sen of the Communist Party of India (Marxist). The government had nothing to do with the private dispute between the Ambani brothers, the minister said.
“We have nothing to do with the private dispute of two industries or industrialists. However, we have everything to do with protecting the interests of the government and public interest, this is our constitutional and legal obligation,” Deora said.
He said the 15 June order of the Bombay high court that directed RIL to supply one-third of KG-D6’s peak output to RNRL at $2.34 (Rs111.38) a unit according to a family agreement had a bearing on government’s gas utilization policy.
“The final order of the Bombay high court has implications on government’s rights to formulate and implement the gas utilization policy under the production-sharing contract,” he said, explaining why the government had to move the apex court against the high court order.
The production-sharing contract is an agreement between the Indian government and RIL regarding the percentage of production each will receive after the company has recovered a specified amount of costs and expenses.
RIL is contesting the claims of RNRL over the supply of 28 million standard cu. m a day of gas from the offshore block for 17 years at $2.34 per unit, 44% cheaper than the government fixed price of $4.2.
RNRL is basing its claims on a 2005 family pact, but RIL has held that it cannot give gas to anybody without the approval of the government, the owner of all sovereign assets.
The three-year-old corporate battle has escalated to the Supreme Court, which is scheduled to hear arguments of the stakeholders on 1 September.
Deora said $4.2 per unit price for gas from RIL’s KG-D6 gas fields in the Krishna-Godavari basin off India’s east coast was lower than rates charged by others such as the UK’s BG Group Plc. and Cairn India Ltd.
Responding to Deora’s statement in Parliament on the price charged by RIL being lower than other private firms, an executive from Reliance-Anil Dhirubhai Ambani Group—of which RNRL is a part—said the government could save up to Rs5,000 crore in fertilizer subsidy if it allowed the gas to be sold at the 44% lower price it was demanding.
“The price of gas under APM (administered price mechanism) is $2 per mBtu (million British thermal unit), while the contractor (RIL) is selling it for $4.2 per mBtu, making over 100% profit,” J.P. Chalasani, spokesman of the group, said over a conference call.
The gas price formula of the government was suggested by RIL, where a small increase in crude oil prices leads to a huge spike in gas prices but a fall in feedstock prices reduces the gas prices only slightly, alleged Chalasani.
Among those who demanded the government’s intervention to save national assets from being appropriated through a family settlement were Samajwadi Party’s Ram Gopal Yadav, Janata Dal (United)’s N.K. Singh, Shiv Sena’s Bharatkumar Raut, Communist Party of India’s D. Raja and Congress party’s Alka Balram Kshatriya.
Sharing the concerns of the legislators, Deora said a study has been commissioned to consider the feasibility of having a uniform price of gas by pooling all the current gas prices.
Mint’s Bhuma Shrivastava in Mumbai contributed to this story.
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First Published: Fri, Aug 07 2009. 12 42 AM IST
More Topics: Government | RIL | Reliance | Mukesh Ambani | RNRL |