Hike in gas price likely soon, but not for under-producing Reliance

Reliance Industries Ltd's two producing fields in the Krishna-Godavari Basin off the Andhra Pradesh coast will not get revised natural gas prices until it makes up the shortfall in gas production, the government has decided.

According to a Times of India report, the petroleum ministry is looking at a new gas pricing regime for domestic producers with a price of $6-6.5 per unit, lower than the price decreed by the former UPA government.

But, with the government delaying any revision of prices, RIL and its partners BP Plc and Canada's Niko Resources had on 17 June served an arbitration notice on the government naming London-based Sir David Steel as its counsel.

The three companies wanted the government to honour its commitment and implement revised natural gas prices upon expiry of the $4.2 per million British thermal unit (mBtu) rate for their eastern offshore KG-D6 fields.

More than a month after it deferred a decision on raising natural gas prices, the government on Friday said it has not taken a final decision on the issue yet.

The previous government had, in December last year, decided to price all domestically produced gas according to a formula suggested by the Rangarajan Committee, from 1 April 2014.

The new government, on 25 June, decided to defer the implementation till September-end to hold wider consultations.

"The present government is considering the matter. As and when a decision is taken, the House will certainly be taken into confidence," finance minister Arun Jaitley said in a reply to the Lok Sabha on Friday.

The Rangarajan formula would lead to doubling of natural gas prices to $8.4 per million British thermal unit. Such a large increase would jack up the cost of urea production, electricity tariff, and natural gas prices.