Oil ministry returns Bank Guarantee to Reliance

New Delhi: In a move that could rules out any gas price hike even after the elections, the Union oil ministry has returned to Reliance Industries a Rs 509.55 crore bank guarantee that it had submitted to get a higher price for natural gas it produces from the eastern offshore KG-D6 field.

The surety, given on April 10, covers the incremental revenue RIL would have got in the April-June quarter if the price of gas were to double to $8.4 per million British thermal units.

Sources said RIL provided the bank guarantee even though the Election Commission had asked the government to defer implementing the new rate, which was to have come into effect from April 1, until completion of the general elections.

The oil ministry returned the guarantee, saying the new price has not been notified and RIL would have to submit the surety when it is announced. The oil ministry was under pressure to notify the increase in the gas price after the last phase of Lok Sabha elections is completed on May 13. An RIL spokesperson did not reply to an e-mail seeking comment.

The Cabinet Committee on Economic Affairs (CCEA) approved a new formula for pricing all domestically produced natural gas in June last year. In December, it said the new rate will be applicable for the main field in the KG-D6 block only if RIL submits a bank guarantee equivalent to the higher revenue it would get from the new gas price.

This surety would be encashed if it was proved the company deliberately suppressed gas output, depriving RIL of the incremental revenue. Output at the Dhirubhai-1 and 3 gas fields at about 8 million standard cubic meters a day is a fraction of the 80 mmscmd output planned for this time.

RIL says geological complexities such as unanticipated water and sand ingress were responsible for the output drop.