RIL ignores oil ministry swap order for KG-D6 gas

Reliance Industries has refused to comply with the oil ministry order to swap its KG-D6 gas with a city gas firm from Andhra saying "trading" in the resource was not permissible under gas utilisation policy.

The oil ministry, had ordered diversion of 2.5 MSCM per day of KG-D6 gas allocated to state-owned GAIL to Hyderabad-based Bhagynagar Gas Ltd (BGL) under so-called gas swapping guidelines.

The shortfall was to be made good by GAIL through imports of liquefied natural gas (LNG) which costs four-times the KG-D6 gas price of $ 4.2 per million British thermal unit. BGL was to be charged the actual price of imported LNG.

In a letter to the BSE, the ministry said if such an "untenable" policy was allowed it would encourage KG-D6 allottees to sell the cheap gas at higher rates as during plant shutdowns when they did not need the fuel.

"KG-D6 gas has been allocated by Government under gas use policy approved by EGoM specifying, sector priority, plant location and use, whereas to implement the said guidelines, RIL is expected to accept change in sector, location and use from currently allocated end use of KG-D6 gas, and not at the instance of the Government but at the behest of the customer apparently without any reference to or intervention of the government," RIL wrote.

The ministry had on 21 September written to RIL saying for a gas swap "parties do not have to approach government for approval."