The committee of secretaries, which has been listening to presentations on the controversial pricing of Reliance Industries Ltd’s (RIL) gas from the Krishna-Godavari (KG) basin, has stuck with the petroleum and natural gas ministry’s original formula, said a ministry official.
The Energy Coordination Committee, headed by the Prime Minister , is expected to meet on Friday to take a call on the gas pricing formula. Any formula approved by the committee would be effective initially for five years.
The secretaries’ committee wrote that it agreed with RIL’s formula, approved by the petroleum ministry. “The committee… endorses the formula… as approved by the ministry of petroleum and natural gas,” said the official, who didn’t want to be named but read out the committee’s note in a telephonic conversation.
The secretaries’ committee consists of secretaries from the ministries of finance, petroleum and power, along with representatives of the Planning Commission. Mint could not independently ascertain all the contents of the secretaries’ committee note.
The energy committee consists of the ministers and secretaries of finance, petroleum, power, coal and non-conventional energy ministries, and the deputy chairman and member, energy, of the Planning Commission, among others. The principal secretary to the Prime Minister is the convenor of the committee.
RIL had proposed a price based on a price discovery mechanism involving user industries along its pipeline, including five fertilizer firms and five power firms. It plans to produce around 80 mscmd (million standard cubic metres per day) of gas from its KG basin field, D-6.
RIL’s pricing formula works out to $4.71 per million British thermal units (mBtu) at the point of production, excluding transportation costs and taxes. But the price is expected to vary, based on factors such as the rupee-dollar exchange rate and the crude oil price.
While mBtu measures the inherent heat energy in natural gas and is used as a unit for pricing, mscmd is the unit for measuring daily production.
Casting a shadow over the gas pricing proceedings has been a bitter legal dispute between Mukesh Ambani’s RIL and Anil Ambani’s Reliance Natural Resources Ltd over the supply of some of the same gas. Another related suit against RIL involves NTPC Ltd, which is seeking to enforce a gas-supply contract as well.
Meanwhile, the government of Andhra Pradesh, through which the gas has to pass to customers outside the state, has vehemently opposed the proposed RIL pricing as well as the methods used to arrive at that pricing.
According to the CEO of energy consulting firm Infraline Energy Yogesh Garg, the price of gas could range between $1.87 per mBtu at the lowest end of the spectrum and $6.62 at the highest, depending on rupee-dollar exchange rates.
The petroleum ministry’s note to the committee of secretaries had accepted the bidding process as having met government guidelines, the ministry official said. It, however, did not approve the exchange rate components in the formula, he said.