New Delhi: Mukesh Ambani-controlled Reliance Industries Ltd, or RIL, India’s most valuable company, said it is losing $100 million of sales a month from the nation’s biggest gas field because of a government delay in allocating buyers for the fuel.
Limited output: RIL has been producing only 60% of the 60 million cu. m daily capacity of its Krishna-Godavari basin oilfield since May.
RIL has been producing 60% of the 60 million cu. m daily capacity in the Krishna-Godavari basin’s D6 field since May, P.M.S. Prasad, president of the company’s oil and gas business, told reporters on Saturday at the field in the Bay of Bengal. Reliance needs government approval to sell the gas.
The company is fighting a lawsuit over output from the field with Mukesh’s estranged younger brother Anil Ambani.
Reliance’s earnings may be affected by the limited output as the government awaits a resolution of the suit before naming additional buyers, said Deepak Pareek, a Mumbai-based analyst with Angel Broking Ltd.
“The government may be going slow on allocating additional gas because half of the peak output is under litigation,” Pareek said.
The cost of paying interest on Rs28,000 crore of debt raised to develop the field is increasing because RIL is unable to repay the borrowings as rapidly as it would like and cut interest costs, Prasad said. “We would’ve liked to repay the loans quicker, he said. “We can’t and that is increasing our interest costs. We will service the debt, not default on it.”
Anil Ambani is trying to enforce a 2005 agreement requiring RIL to sell natural gas from the field off the country’s east coast to his Reliance Natural Resources Ltd, or RNRL, at 44% less than the price set by the Union government.
The group firms of the two brothers have approached the Supreme Court on a Bombay high court ruling that RNRL would get gas at $2.31 per million British thermal unit, or mmBtu. The apex court will commence hearing on 20 October.
Meanwhile, Anil Ambani group firm Reliance Power Ltd alleged on Sunday that RIL was charging unauthorized margins on sale of gas to power and fertilizer units, imposing an additional burden of Rs10,000 crore on them, and sought immediate intervention by the government.
“Reliance Industries Ltd is charging an illegal and unauthorized marketing margins of 13.5 cents (Rs6.6) per mmBtu on sale of gas from (the) KG basin D6 fields... RIL’s decision to levy this margin does not have the approval of the empowered group of ministers,” Reliance Power chief executive officer J.P. Chalasani said in a statement.
“The major burden will be borne by (the) government of India in the form of fertilizer subsidies and (the) governments of Andhra Pradesh, Maharashtra and Gujarat in the form of power subsidies,” he said.
(‘PTI’ and Mint’s Bhuma Shrivastava contributed to this story.)