With the election code of conduct still in place, the petroleum ministry has returned the bank guarantee given by Mukesh Ambani-led Reliance Industries Ltd (RIL) in connection with the upward price revision for natural gas supplied by it.
The government's June 2013 approval of the new gas price came with a rider for RIL that permitted the company to sell natural gas at the revised doubled price from April 2014 provided it gave a bank guarantee to be encashed if it is proved that the company hoarded gas or deliberately suppressed production at the main Dhirubhai-1 and 3 (D1 and D3) fields in the eastern offshore KG-D6 block.
A senior petroleum ministry source told IANS Friday that RIL had, last week, furnished a bank guarantee to avail of the new gas price, which the ministry has returned since they are still not permitted to implement the revised price.
Last month, the Election Commission had asked the government to defer announcing the new price of natural gas produced by companies such as RIL till after the general election has been completed.
The new gas price, approved by the cabinet and based on a formula suggested by the C. Rangarajan Committee, would result in a doubling of the current rate of $4.2 per million British thermal unit (mbtu), that for RIL gas expired on March 31 at the end of its five-year contractual term.
The ministry had in 2012 imposed a penalty of over $1 billion on RIL for failing to produce gas in line with the pre-stated targets. It blamed the company for deliberately suppressing production by not drilling the required number of wells.
RIL has approached for arbitration against the order, saying the fall in output is owing to geological complexities and lower than anticipated reserves.
Current output from the RIL's KG-D6 gas fields has dwindled to around 12.5 million metric standard cubic metres a day (mmscmd).