CAG looking into decision to allow RIL higher gas price

The ministry says it plans to encash the guarantee if it is proved that RIL deliberately suppressed gas output.

The Comptroller and Auditor General (CAG) is now inspecting the Centres decision to allow a higher price for natural gas to Reliance Industries (RIL) from next April,even as RIL had failed to provide a commitment on gas volume.

It wants the government to ensure that RIL delivers the committed shortfall at the lower price agreed upon earlier,before it gets the new price for fresh output.

Contractor is responsible for delivering the gas as per the approved production profile at $4.2 per mBtu and there is a shortfall in gas production against its commitment. It may be please be informed as to how the ministry is ensuring that the contractor delivers the gas shortfall at $4.2 rather than getting the benefit of the new revised price from April 2014, CAG wrote to the petroleum ministry on November 29.

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In the event RIL is allowed to charge the new price,the CAG wants to know the subsidy amount akin to a loss to the national exchequer to be borne by the government in fertiliser and power sector due to the price revision. When contacted,a spokesman for RIL declined to comment on the CAG queries to the ministry. We are not even aware of this development, he said.

The Cabinet Committee on Economic Affairs in June approved the Natural Gas Pricing Guidelines for five years under which a pooled pricing mechanism ensures a higher price estimated at $8.4 per mBtu for the first quarter beginning April 2014.

CPI MP Gurudas Dasgupta has alleged that no due diligence was done while increasing the price,and has filed a PIL in the Supreme Court seeking a review of the Centres decision.

The CAG has also questioned the ministrys proposed safety measure of taking a bank guarantee from RIL in lieu of allowing the high price.

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The ministry says it plans to encash the guarantee if it is proved that RIL deliberately suppressed gas output.

The CAG has also asked whether the acceptance of the bank guarantee would lead to extending the high-price benefit on the previous shortfall,given that any production as per the plan,needs to be accounted only for the shortfall.