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Govt can’t scrap RIL contract: Moily to PM
Govt can’t scrap RIL contract: Moily to PM, Oil Minister M Veerappa Moily, Manmohan Singh. While the contract provides for termination in case of a default by a contractor, Reddy in May 2012 had slapped penalty of $1.005 billion.
- Cites a pending arbitration on output lagging targets
- Jaipal Reddy’s decision before arbitrator tribunal
- Oil PSUs will be major beneficiaries of price hike
- They account for about 80% of gas output
New Delhi: Amid controversy over gas price hike, Oil Minister M Veerappa Moily has told Prime Minister Manmohan Singh that Reliance Industries' (RIL) contract for KG-D6 gas fields cannot be terminated pending arbitration on issue of output lagging targets.
Moily in a 13-page letter to the Prime Minister explained the process, the contractual requirement and the steps followed for raising natural gas prices from April 1, without which several gas fields of both private sector firm RIL and state-owned ONGC would be economically unviable to produce.
Rebutting AAP allegations that the price increase was done to benefit RIL, Moily on February 14 wrote to Singh saying ONGC's average cost of producing natural gas was about $3.6 per million British thermal unit (mBtu) in 2012-13 and its newer finds in deep sea cost more than current rate of $4.2. Public sector firms ONGC and Oil India (OIL) account for about 80 per cent of India's gas production and will be the major beneficiary of gas rates going up from $4.2 to $8.Kejriwal before resigning ordered the ACB to register an FIR against Moily, RIL and its Chairman Mukesh Ambani for allegedly creating an artificial shortage of gas and raising prices.
On gas production from RIL's eastern offshore KG-D6 gas fields lagging targets since 2010-11, Moily told Singh about the process initiated by his predecessor S Jaipal Reddy of penalising the firm by disallowing a portion of cost incurred.
While the contract provides for termination in case of a default by a contractor, Reddy in May 2012 had slapped penalty of $1.005 billion. RIL disputed the penalty and initiated arbitration. "In view of the contractual provision under the PSC (production sharing contract), the government will not be able to terminate the contract on account of shortfall in production as the matter is pending before the arbitral tribunal," Moily wrote.
