The Union government announced that it had got applications for the allocation of 550 million cubic metres of natural gas from prospective power producers, making any deal between the Ambani brothers for future gas supply less likely.
A recent Supreme Court judgment had held that it was up to the government of India to allocate gas, even if it is produced by a private company.
Jitin Prasada, minister of state for petroleum and natural gas, said the Centre has received applications for the allocation of a whopping 550 million cubic metres (mmscmd) of natural gas a day from those who wish to set up new gas-based power plants.
The current capacity of gas-based power in the country is only around 30-35 mmscmd.
The Centre had recently allocated around 18 mmscmd of gas for power plants from an expected production of 80 mmscmd from Reliance Industries' KG D6 block in the Bay of Bengal.
The total gas production in the country is only around 135 mmscmd, split equally between government companies and Reliance Industries.
The new applications are likely to be bad news for the Anil Ambani group, which has been trying to secure an assurance of gas for its planned power plants totalling 28 mmscmd.
A recent ministerial meeting on gas allocation, which was widely expected to change existing gas policy to allow the Mukesh Ambani group to promise gas to the Anil Ambani group, failed to arrive at any such decision.
A high level of demand, of the order of 550 mmscmd, is likely to make it difficult for the government to allow the two Ambani groups to enter into a contract for future gas supply.
Prasada also announced that oil-marketing companies like Indian Oil Corporation and Hindustan Petroleum will no longer conduct interviews for the award of LPG dealerships, to combat corruption. He said such awards will now be done by drawing lots.
Prasada said Reliance Gas Transportation Infrastructure Limited (RGTIL), a private company owned by Mukesh Ambani, is the only private firm permitted to build pipelines in the country. In addition to the existing east-west pipeline, the company has been granted permission to lay pipelines from Chennai to Mangalore through Bangalore, from Chennai to Tuticorin and to Vijaywada, and to extend its pipeline from Kakinada in Andhra Pradesh to Howrah in Bengal.
Union minister for petroleum and natural gas Murli Deora also appealed to the state governments to reduce taxes on petroleum products. In a written letter read out in Parliament, Deora justified the recent increase in prices of petrol and diesel, saying high taxes were not allowing government-owned companies to sell petrol and diesel within the prices suggested by the government.
"In some states, the sales tax on petrol and diesel is as high as 33% and 24.7% [respectively]," Deora said in a six page statement, urging states to lower the tax burden on petroleum products.
Petrol and diesel are priced at about Rs25 a litre in the international market, from where India gets around 75% of its crude oil. Taxes nearly double the selling price in the case of petrol.
But numbers released by Deora's junior, Prasada, indicated that the Centre charges nearly twice the amount of tax on petrol compared to the states. According to the numbers, released only for Delhi, central taxes on a litre of petrol amount to Rs16.44 — a whopping 62% on a base price of Rs26.44. State taxes, in comparison, contribute only Rs8.57 a litre, or about 33% of the base price. Together, the taxes amount to half the end selling price of Rs51.45 per litre of petrol in Delhi.
Central taxes outstrip state taxes in diesel too, but the overall tax burden is lower at around 41% of the base price of Rs26.63 per litre in Delhi, taking the retail price to Rs37.62.
Deora, however, promised to rein in retailing companies such as Indian Oil if prices go too high. "The government has made it very clear that in case the international oil prices display high volatility, it will intervene," he said.
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