Gas price hike not to help RIL, India states officially

A week after it almost doubled the price of domestically-produced gas, the petroleum and natural gas ministry rebutted charges that the move would result in windfall gains for to Reliance Industries Ltd, India's main private gas explorer.

New gas production from the company's fields will not start before 2017-18, the ministry said in a statement.

"Presently RIL is producing only 10 per cent of the gas production in the country. With the new price, it is expected that their production from KG D-6 will increase with the additional investment," the statement said.

The Cabinet Committee on Economic Affairs (CCEA) recently approved the pricing of all domestic gas on the 'Rangarajan formula' from 1 April 2014. Under the new pricing norms, gas is likely to be about $8.4 per million British thermal unit (mmBtu), against the current $4.2.    

''The increased price will help monetise discoveries which are not viable at current rates,'' the statement said.    

"However, the gas flow (from the new fields) is not likely to start before 2017-18, and therefore allegations of windfall gains are misconceived."

The statement further said that more than two-third of the domestic production is by public sector companies, which stand to gain the most from the price hike.    

The oil ministry said the main reason for weak domestic gas production was the low sale price.    

"The present price of $4.2 per mmBtu has not been found to be feasible and the ministry is not approving the development plan for the lack of commercial viability. Around 3 trillion cubic feet of gas reserve is waiting to be exploited," it said.    

The Rangarajan formula for pricing will apply to all forms of natural gas - conventional, shale gas and coal-bed methane (CBM), and would apply from 1 April 2014.

(Also see: Chidambaram defends gas price hike decision)