RIL to wait for petro report

Reliance Industries, which faces an oil ministry missive against selling 8216;8216;underpriced8217;8217; gas to Anil Ambani8217;s company, is in no hurry to sort out the issue with the ministry.

Reliance Industries, which faces an oil ministry missive against selling 8216;8216;underpriced8217;8217; gas to Anil Ambani8217;s company, is in no hurry to sort out the issue with the ministry. This increases the prospects for further delay in commissioning of India8217;s largest power project in Dadri.

Sources in India8217;s largest corporate RIL say they would rather wait for the government to appoint the committee and prepare a report than seek clarifications on government8217;s Tuesday statement. RIL sources, seeking anonymity, said the deal with Anil Ambani is the first of its kind. In other gas agreements, they add, public sector units were signing the agreements on behalf of the government.

Hence, sources say, this is for the first time any gas sale agreement has been signed between two private companies with government getting a part of profits as royalty.

On Wednesday, the oil ministry had said that it will set up a committee to frame regulations on transparent guidelines for gas valuation. It said the gas agreement between the two brothers was not signed under 8216;8216;arms length basis8217;8217; and was underpriced.

As part of a settlement between the promoters of the Reliance group, Mukesh Ambani-owned RIL had agreed to sell gas to Anil Ambani8217;s Reliance Natural Resources Ltd at a price of 3.18 mbtu. The government, which gets its share of profits from gas sale, says it will lose revenue if the gas is sold at lower price to the Anil company.

The Anil Ambani camp, on the other hand, says the agreed gas price cannot be called discounted as there is no precedent of long-term benchmark contracts available in India.

The gas price was determined after international bidding which took almost one year to determine from announcment to the closure of bid. Besides, Anil sources say, the 4.15 per mbtu price quoted by the GoI earlier is for short-term contracts and not for long-term contracts signed between RIL and RNRL.

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The delay in settlement of this issue will also hit RIL, which has to tie up customers for its gas by 2008 when the production at its Krishna Godavari basin-based gas fields begins.

Sources in Anil camp, however, reiterated that the matter is entirely between Reliance Industries and the government of India and RNRL has no role to play in it.

The RNRL scrip, meanwhile, closed marginally down at Rs 20.10 on the Bombay Stock Exchange as compared to its yesterday closing of Rs 20.75.