The Anil Dhirubhai Ambani Group-promoted Reliance Natural Resources Limited has told the government that the floor price set by Reliance Industries Limited in its gas pricing formula, besides being 'very high' at $4.64 per million British thermal unit (mBtu), has been fixed by the company 'without any basis.'
With RIL fixing the floor price, the bidders are not allowed to quote 'true market prices,' RNRL says in a presentation made to the Planning Commission.
The company also says that RIL's process of inviting only selective companies to put in indicative bids for the K-G gas is not transparent enough.
"The price formula protects the contractor from price risk with 95 per cent fixed portion," RNRL said in its presentation. This essentially means that RIL is protecting itself from sharply varying bids.
At a press conference in Srinagar on Monday, Petroleum Minister Murli Deora said the government would come out with a final approval for the K-G basin gas within two months.
The Mukesh Ambani-promoted RIL maintained that the price discovery exercise was in line with the government instructions.
"We invited companies which have plants along our pipeline and are, thus, potential buyers. They had the option of not bidding at all. The fact that they bid, makes their bid the market discovered price," an RIL spokesperson said.
Meanwhile, RIL on Monday made a presentation on gas pricing exercise to the Department of Fertilisers.
RNRL has further alerted the government by saying that every $1 per mBtu increase in gas price inflates power tariff by 54 paise per unit and increases fertiliser subsidy by Rs 4,000 crore per year.
RIL undertook a gas price discovery exercise in early-May for its K-G gas, for which it had invited indicative bids from five fertiliser and five power companies. These are typically the largest consumers of gas in the country.
The price, after the 10 bids were opened, worked out to $4.79 mBtu, sources said. This is much higher than the $2.4 per mBtu that the gas-based fertiliser plants are currently paying.
