Parliament's standing committee on finance has summoned senior petroleum ministry officials to explain the revenue implication of falling gas production from Reliance Industries Ltd's (RIL's) D6 block in the Krishna-Godavari basin (KG-D6) and the company's demand to increase the price.
Earlier this month, it had questioned the finance and revenue secretaries on the issue and sought details of revenue loss to the government on account of low production from KG-D6.
A section within the committee believes if the Union government agrees to RIL's demand to increase the price, the government would have to bear an additional annual subsidy of Rs 50,000-60,000 crore, said a person familiar with the proceedings. Shortage of natural gas directly impacts the power and fertiliser sectors which had been allotted KG-D6 gas on a priority but are not getting their full quota. Production from here has fallen to 20.5 million standard cubic metres a day (mscmd) in 2012 from the projected 81 mscmd.
At the panel's meeting on November 9, seniors from the finance ministry said the pricing of natural gas did not directly come in their domain. They offered to study the issue and said they'd be in a better position to answer the queries raised by the members in the next meeting, expected soon after the winter session of Parliament begins on November 22. Another Parliament panel, the Public Accounts Committee (PAC), has already asked RIL executives for details on profit sharing and the exchange of letters between the company and the Union government at the time of signing their contract. The PAC is proceeding on the report of the Union comptroller and auditor general on KG-D6.
On November 1, the petroleum ministry had said there was no proposal to revise prices of KG-D6 gas before the end of the five-year period for which it had been fixed, namely April 2014.
This was after anti-graft activist Arvind Kejriwal had charged that Jaipal Reddy had been transferred from being the petroelum minister due to his opposition to the demand for a revision. RIL is seeking a three-fold increase in the gas price, to $14.2 per unit against the current price of $4.2, fixed for the five years beginning April 2009, when production started.