Oil Min­istry Hope­ful it Can Re­solve Gas Row with RIL

Looks to re­solve dis­pute within 90-day pe­riod avail­able for am­i­ca­ble set­tle­ment

The Economic Times - - Companies - RA­JEEV JAYASWAL

The oil min­istry hopes to re­solve the gas price dis­pute and the ar­bi­tra­tion no­tice from RIL am­i­ca­bly but there are doubts whether this can be done by the out­go­ing UPA govern­ment or the new regime that may take the mat­ter to Cab­i­net. Re­liance In­dus­tries (RIL) has served an ar­bi­tra­tion no­tice against the govern­ment for the de­lay in an­nounc­ing new gas price from April 1, which it says has cast a shadow on bil­lions of dol­lars of in­vest­ment in gas fields. Govern­ment sources say that the min­istry is con­fi­dent that the mat­ter will be re­solved within the 90-day pe­riod avail­able for am­i­ca­ble set­tle­ment un­der the con­tract. How­ever, there are dif­fer­ences within the min­istry over when and how this may be re­solved. Oil Min­is­ter Veerappa Moily wants the new price an­nounced as soon as the elec­tion code of con­duct is with­drawn. The Elec­tion Com­mis­sion had blocked the im­ple­men­ta­tion of the Ran­gara­jan for­mula, which would have dou­bled gas prices to about $8.4 per unit from April 1. The ex­plo­ration di­vi­sion of the oil min­istry, how­ever, feels that fresh Cab­i­net ap­proval is needed to get a clear de­ci­sion on sev­eral re­lated is­sues. These are — whether the new price can be charged ret­ro­spec­tively; al­low­ing BP and Niko to get the new price against bank guar­an­tees and whether the price should be charged on the ba­sis of the net heat value, which is the prac­tice in In­dia, or the gross heat value, which is about 10% higher. The Ran­gara­jan for­mula is silent on the heat con­tent of gas. Oil Min­is­ter Veerappa Moily does not want the mat­ter to be sent to the Cab­i­net for the third

The ex­plo­ration di­vi­sion of the oilmin feels that fresh Cab­i­net ap­proval is needed to get a clear de­ci­sion on sev­eral re­lated is­sues

time. Of­fi­cials said that since Veerappa Moily is un­likely to for­ward the pro­posal to Cab­i­net, the min­istry can ei­ther an­nounce the price im­me­di­ately af­ter code of con­duct is lifted or leave it to the new govern­ment.

One govern­ment source said that cab­i­net’s ap­proval may not be needed if price is raised from the July quar­ter.

“As per the ar­bi­tra­tion no­tice, we have 90 days to re­solve the mat­ter am­i­ca­bly, so we have time. We are also plan­ning to take le­gal opin­ion on the ar­bi­tra­tion no­tice,” a se­nior oil min­istry of­fi­cial said re­quest­ing anonymity.

The govern­ment had ap­proved a price of $4.2 per unit for Re­liance In­dus­tries’ gas for five years up to March 31, 2014.

Last year, the govern­ment ap­proved the new for­mula to be im­ple­mented from April 1, and no­ti­fied it in Jan­uary 2014.

Moily has ad­mon­ished of­fi­cials for not an­nounc­ing the price in Fe­bu­ray, be­fore the code of con­duct was en­forced, but of­fi­cials had ar­gued at that stage that some of the data re­quired in the Ran­gara­jan for­mula was not avail­able be­fore the mid­dle of March.

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