Oil Ministry Hopeful it Can Resolve Gas Row with RIL
Looks to resolve dispute within 90-day period available for amicable settlement
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 Oil Minister Veerappa Moily wants the new price announced as soon as the election code of conduct is withdrawn.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.