Within days of approving a price formula for gas to be produced by Reliance Industries, the government on Friday said it will ask the Mukesh Ambani company to prioritise fuel sales to fertiliser plants, city gas and existing power plants."Government is well within its right to fix sectoral priorities keeping in mind the overall national interest. The Empowered Group of Minister (EGOM) will in future meetings decide on which sectors should be given priority in allocation," Petroleum Secretary M S Srinivasan said in New Delhi.
The EGoM had on September 12 approved a price of Rs 172.20 per million British thermal unit for Reliance Industries's KG-D6 gas. This was 8.32 per cent lower than Rs 187.84 (4.33 dollars) per mBtu price proposed by Reliance Industries.
Srinivasan said the price approved by the EGoM will apply uniformly to all the sectors. "It should not matter to the producer (Reliance Industries) as to who uses the gas, as a uniform price will be charged from all."
"The guiding principle for gas allocation would be the Integrated Energy Policy drawn by the Planning Commission," he said, adding that fertiliser plants running below capacity and on expensive alternative fuels should be given the first right.
Projects to sell CNG to automobiles and existing power plants will be prioritised in that order.
He, however, said that the government will not allow trading in gas. "The policy clearly states that the gas should be sold to end users and so there is no scope for traders."
Government will examine all contracts to see they meet the policy parameter of "transparent, open, arms-length transaction between unrelated entities," he said.
The government has said the approval of price for the natural gas Reliance Industries plans to produce from KG fields will not affect the outcome of the legal cases NTPC and Anil Ambani firm RNRL have filed for fuel supplies against the Mukesh Ambani company.
"The decisions taken in (Wednesday's) EGoM meeting will be without prejudice to the NTPC vs Reliance Industries and RNRL vs Reliance Industries court cases, which are at present subjudice," an official press release announcing the EGoM decision said yesterday.
An Empowered Group of Ministers headed by External Affairs Minister Pranab Mukherjee had yesterday slightly changed the price formula proposed by Reliance Industries to approve KG-D6 field gas price of $4.20 per mBtu (Rs 172.20 per mBtu) as against $4.33 per mBtu (Rs 187.84 per mBtu) proposed by the company. The approved price is only three per cent lower in dollar terms and 8.32 per cent less in rupee terms.
The Bombay High Court had early this year in an interim decision on a plea filed by Anil Ambani group company Reliance Natural Resources Ltd restrained RIL from selling about 81 million standard cubic meters per day of gas (mmscmd) to any other party except NTPC, RNRL or its own use.
RNRL had sought supply of 28 mmscmd of gas at the price Reliance Industries had quoted in the NTPC tender as was promised in the Ambani-family split agreement.
Reliance Industries had bid a delivered price of $3.18 per mBtu (wellhead gas price of 2.34 dollars per mBtu) for supply of 12 mmsmcd in a 2004 NTPC tender but did not implement it due to differences over certain provisions. This forced the state-run power generating firm to drag Reliance Industries to Bombay High Court.
Reliance Industries is to begin production of 40 mmscmd of gas from the KG-D6 fields off the Andhra cost from July 2008. Peak output is slated to touch 80 mmscmd later.
Via| Times of India
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