RIL looking to increase price of KG-D6 gas: Says government will also benefit from hike

 Reliance Industries Ltd (RIL) has recently intimated the petroleum ministry about its desire to charge $1 per mmbtu more for gas from the prolific KG-D6 block. The private sector E&P major said there was something in it for the government too, since it would receive more profit petroleum as a result of quicker cost recovery -- at the higher prices -- for the operator. for reference purposes, the full contents of the RIL letter addressed to the ministry, asking for the government`s views on the proposed hike in prices.

• Presently, gas from the KG-D6 block is being sold to all customers at the government-approved rate of $4.205 per mmbtu. However, two companies, namely GMR Energy and Welspun Maxsteel, have put in tempting offers for this gas at significantly higher rates of $5.25 and $4.75 per mmbtu, respectively.  
•  The company pointed out that a higher per-unit price for KG-D6 gas will imply that RIL can recover its costs more quickly, which in turn means that, in the long run, the government will be able to appropriate a larger amount of revenue as its share of `profit petroleum`.
•  RIL said that the increase in prices was completely in line with the provisions of the production sharing contract (PSC). The company quoted article 21.6.1 of the PSC, which says, "The Contractor shall endeavour to sell all Natural Gas produced and saved from the Contract Area at arms-length prices to the benefits of Parties to the Contract".
• RIL`s interpretation of this provision is that since customers are themselves offering higher prices for KG-D6 gas, the operator should be allowed to sell at these prices, especially because the hike would benefit both the company and the government.