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It is not the price which is worrying the buyers of the Reliance Industries-operated KG-D6 gas, but the supply validity period proposed by the private producer.
While RIL is in favour of an annual contract in the absence of any clarity on new gas price, fertiliser companies are seeking a five-year agreement.
The existing D6 gas price as well as supply agreements with the buyers expire on March 31.
The RIL-BP-Niko combine and the buyers, mainly fertiliser companies, will now have to ink new gas supply and sales agreements. RIL and its foreign partners in the block have been asked to continue to sell the fuel at the prevailing rates of $4.2/unit (gas is measured in million British thermal units) from April 1.
This follows the deferment of new price announcement by the Government based on the Election Commission directive.
When contacted, both the fertiliser companies and RIL maintained that the final decision will be based on a Ministry of Petroleum and Natural Gas directive.
The Ministry has convened a meeting on Friday of all stakeholders to resolve any pending issue.
Currently, RIL and its partners have over 50 agreements, of which 16 are live – all of them with fertiliser companies.
These agreements were signed in 2009 and will expire on March 31.
RIL had circulated the supply and sales agreements to the fertiliser companies that would be applicable from April 1.
Asked whether the price calculation will be done on the basis of gross calorific value (GCV) or net calorific value, RIL said: “It will be based on what price the Government decides.”
The heat produced from natural gas is measured in calorific value.
If RIL calculates it on GCV, then the price will automatically go up an extra dollar, according to industry sources.
Key features However, RIL maintained that the proposed agreement is aligned with the Rangarajan price formula based on which price changes every quarter.
Some of the key features of the proposed agreement include the ‘no take or pay obligation’ on the buyers – buyers to pay only for the quantity supplied by the seller, in periods of constraints gas to be supplied on pro-rate basis to all fertiliser buyers.
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