The CoS, comprising secretaries of petroleum, power, fertilizer, expenditure and law, was to meet on July 5 for deliberating on RIL's KG-D6 block but the meeting has been rescheduled to July 6, officials said.

Oil Ministry at a CoS meeting on July 2 pleaded for not changing the current policy that allows firms discovering hydrocarbons to sell at market prices. The ministry has argued that attempts to regulate prices could be seen as government going back on its commitment and would dampen the forthcoming auction of oil and gas blocks (NELP-VII).

It argued that a low gas price of 2.5 dollars per million British thermal unit will reduce the government's share in gas production from KG-D6 to 1.2 billion dollars and royalty to 1.6 billion dollars. At 4.5 dollars, the profit share jumps to 9.6 billion and royalty to 2.9 billion, officials said.

If the government's revenue kitty is large, it would be in a better position to subsidise fertilizer production. On demands of government taking its share of output in kind, the ministry felt the quantities will vary from year to year depending on the investment made and the price and would require government to make investment in infrastructure facilities synchronous to Reliance's facilities.

Officials said government's share in gas output will be only 0.4 million standard cubic meters per day out of the initial production of 40 mmscmd in first year. This rises to 23 mmscmd in fifth year.

The ministry at the July 2 meeting said it would be very difficult for contractors to tie up markets and consumers as the quantum of gas of both the contractors and the government, if marketed separately, will be more uncertain.

Undertaking total sale of the entire quantum of gas helps the contractor to realise better value and stable gas sales contracts due to larger volumes, officials said.

The option to take gas profit in kind by the government may be perceived as unfriendly and may deter inflow of investment in the E&P sector, especially for gas due to government interface at production and sale stages, according to the presentation made by oil ministry to CoS.

As per estimates, there could be wide variation in the government's share of profit from petroleum on a year-to-year basis and the government nominee may be forced to sell substantial volume of gas on spot basis leading to sub-optimal realisation of gas price.

RIL has proposed to sell KG-D6 gas at 4.33 dollars per mBtu, lower than the 5.70 dollars per mBtu price discovered for sale of three mmscmd from Panna/Mukta and Tapti fields.

This price can save over Rs 6,400 crore (Rs 64 billion) in fertilizer subsidy by replacing naphtha (15.31 dollars per mBtu), fuel oil (9.36 dollars per mBtu) and LNG (7.91 dollars per mBtu) used in fertilizer plants currently, they added.