New Delhi: The government will lose $10 billion in revenues and Reliance Industries will make no profit if natural gas from its KG basin fields is sold at subsidised rates instead of the market price, a petroleum ministry official said.
The government will get $ 4.6 billion in royalty, profit share and corporate tax if Reliance gas is priced at current subsidised rate of $ 2.50 per million British thermal unit (mBtu). This could go up to $ 14.5 billion if gas is sold at a market-determined price of $ 4.5 per mBtu.
“Reliance, which plans to begin production from its KG-D6 block off the east coast from July 2008, stands to get $ 6.6 billion in revenues at $ 2.5 per mBtu gas price, almost all of which will go into recovering $ 5.2 billion investment being made for developing the field and the project financing cost,” the official said.
“At $ 4.5 per mBtu, Reliance will get $ 14.9 billion in revenues,” he said, indicating the government may accept the price formulation proposed by the company that caps it at $ 4.58 per mBtu at rupee-to-dollar rate of 41.
RIL plans to index gas price to crude oil with a floor of $ 25 a barrel and a cap of $ 65 per barrel. At the lower level, the gas price comes at $ 2.5 per mBtu.
”This price compares very favourably to the current price of gas being sold by private operators like British Gas ($ 4.75 per mBtu for Panna/Mukta and Tapti fields) and imported LNG ($ 4.8 per mBtu),” he said.
The delivered price of Reliance gas at power and fertiliser plants would be between $ 5.2-6.2 per mBtu, depending on location and taxes.
The official said the delivered price of gas in Andhra Pradesh would be $ 5.20 per mBtu, $ 5.84 per mBtu in Maharasthra and Gujarat and $ 6.18 per mBtu in northern India.
Compared to this, the Iran gas through the proposed $ 7.4 billion Iran-Pakistan-India pipeline will cost $ 6.02 per mBtu at India-Pak border while the same from Myanmar would cost $ 5.53 per mBtu.