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Leak in Reliance gas supply deal

New Delhi, May 3: Reliance Industries’s proposal to supply natural gas at a cheap price of $2.34 per million British thermal units (mBtu) from its giant Krishna-Godavari basin field to the Anil Ambani-controlled Reliance Natural Resources Ltd has run into rough weather in the petroleum ministry.

Senior officials say if the ministry gives the go-ahead for the sale of gas from the field in the Bay of Bengal at this artificially low price, the government would lose Rs 25,000 crore over the 15-year period of the contract.

The government is entitled to get royalty and profit petroleum on the price at which RIL sells gas from the offshore field. Lowering the price will drastically bring down the government's share.

Ministry officials said RIL as a promoter of Panna-Mukta and Tapti fields wanted to sell gas to GAIL (India) Ltd at $5.57 per mBtu this year and finally settled for $4.75 per mBtu after some hard bargaining. The real price is in fact higher as the government included the payment due to it on account of royalty in this price.

RIL had submitted a letter to the petroleum ministry for approval of the price for sale of gas to RNRL at a delivered price of $3.18 per mBtu, with the well-head price being $2.34 per mBtu.

“This conflicting position of Reliance cannot be justified and based on the existing prices in India, the price proposed by RIL cannot be considered as market-determined. The approval of proposed price would in effect mean that the government is subsidising RNRL,” say senior officials.

In its letter to the ministry, RIL has stated it would sell 28 million standard cubic metres of natural gas from its fields to Anil Ambani's 5,600-mw Dadri power project in Uttar Pradesh.

Since the proposed project is situated near Delhi, it was expected to sell power to the capital as well where Anil Ambani already has a power distribution company.

The proposed power plant was announced by Anil Ambani along with chief minister Mulayam Singh Yadav and Samajwadi party general secretary Amar Singh as part of the plan to develop Uttar Pradesh.

After the Ambani brothers fell out, Anil has been complaining that the power supply deal for the Dadri power plant is being delayed.

Interestingly, RIL has also run into problems with NTPC as it has not met the time schedules for supplying natural gas to the public sector power major. NTPC has even moved court on the issue.

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