There seems to be no end to controversies pertaining to KG-D6 block gas price. A fresh dispute has arisen between the producers (Reliance Industries Ltd, BP, and Niko) and the buyers — fertiliser companies — on the date from which the new gas price will be applicable.
The dispute is on whether the new gas price announcement, which was deferred by the Government on the Election Commission’s directive, will be applicable retrospectively (effective April 1, 2014) or from the date when it was announced. The new gas price is expected to be almost double the existing D6 gas price of $4.2/unit (gas is measured in million British thermal units) excluding local levies, marketing margins and transmission tariff. RIL and its foreign partners in the block were asked to supply gas to fertiliser companies at the prevailing rates till the new price is announced by the Government. All stakeholders were asked to work out the agreement details. But, the bilateral discussions between the buyers and the seller have raised a new issue with RIL not accepting the interpretation of fertiliser companies on what transpired at the meeting convened by Ministries of Petroleum & Natural Gas and Fertiliser & Chemicals.
In a letter to fertiliser companies this week, RIL said “…the formula leading to a gas price of $4.2/unit was valid only till March 31, 2014. By a notification dated January 10, 2014, the Government has notified the gas price formula. Clearly, with effect from April 1, 2014 a revised price is applicable to all gas supplied by us (RIL and its partners) and accepted by you (buyers).”
The letter further states that the terms and conditions on which the gas is being supplied is a matter of bilateral discussions. “These include your (fertiliser companies) providing us (RIL and its partners) the security for payment of differential between the previous price, which has come to an end on March 31, 2014 and the price applicable effective April 1, 2014.”
However, the fertiliser industry feels that RIL is misleading by trying to suggest that pricing guidelines and prices are identical. RIL believes that new price will be effective April 1 till June 30, and it is only the dollar value to calculate the price which has to be announced.