RIL in fresh trouble as CAG questions Ministry on gas price hike

Sujay Mehdudia
NEW DELHI: The Mukesh Amba-

ni-owned Reliance Industries

Limited (RIL) is in for more
trouble as the Comptroller
and Auditor-General has questioned the Petroleum and Natural Gas Ministry over the
recent gas price increase and
wanted to know the steps taken to ensure that the operator
(RIL-BP) delivers gas at $4.2
mbtu as per the approved pro-

duction plan.
Virtually questioning the
Rangarajan formula, the CAG
has taken serious note of the
price revision done in July and
sought to know why the Ministry has not exercised its right to
x the price under Article
21.6.3 of the production sharing contract (PSC) for the KGDWN-98/3 block.
In its August 14 communication, the Office of the Principal Director of Audit,

Economic and Service Ministries has sought to know the

steps the Ministry has taken to
make sure that the operator
complies with PSC provisions
and meets the Addendum to
Initial Development Plan
(AIDP) targets, given that
technical reports have indicated that the operator has not
fullled its obligations in respect of drilling wells. In view
of the shortfall in gas production due to non-compliance

with the production sharing

contract and the ADIP, has the
government ensured that the
operator delivers as per the approved production prole at
the price xed of $4.2 mbtu?
asks the letter. If not, reasons
thereto, along with supporting
documentation. If yes, orders/
action taken by the Ministry
may be detailed along with
supporting documents.
The CAG has also asked the
Ministry to clarify why it has

not exercised its right to x

price for the KD-D6 block in
view of details of the ADIP, the
statement of costs, expenditure and receipts and cost recovery
statements
and
shortfall in production. As per
records made available for audit with reference to requisition 30, dated July 18, 2013,
regarding revision of pricing of
natural gas, the Petroleum
Ministry initiated a proposal
for the Cabinet Committee on

Economic Affairs to x a new

price of domestic gas as per the
recommendations of the Rangarajan Committee.
As per provision 21.6.3 of the
PSC, the formula or basis for
the prices to be determined
shall be approved by the government before the sale of natural gas to consumers. To grant
approval, the government shall
take into account the prevailing policy, if any, on the pricing
of natural gas and it may dele-

gate this function to a regulatory authority. The basis for

valuation of natural gas from
the KG-D6 block has been regulated by the Ministry.
In this regard, audit observed that while approving the
AIDP for the KG-D6 in December 2006, the DirectorateGeneral of Hydrocarbons considered rates between $4 and
$5 per mbtu for a production
prole up to 2020 and also
worked out the government

take on prot petroleum on

these xed prices. However,
government is aware that the
natural gas production from
the D1-D3 gaselds is less than
that approved by the managing
committee, the letter says.
The average output during
2010-11 was 48.13 mmscmd
against the approved production of 53.40 mmscmd; during
2011-12, it came down to 35.33
mmscmd,
against
61.88
mmscmd.