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September 10, 2007 15:18 IST
Reliance Industries [Get Quote] has warned of cartelisation if it is again asked to seek price bids from consumers for the natural gas it plans to produce from its eastern offshore KG-D6 fields.
"The bidding process followed by RIL (that discovered the price of $4.33 per million British thermal unit for KG-D6 gas) was a transparent and legally complete process in line with the provisions of the Production Sharing Contract," RIL President & CEO-Petroleum P M S Prasad wrote to Petroleum Secretary M S Srinivasan.
The Prime Minister's Economic Advisory Council had in view of doubts about transparency of the bidding process suggested rebidding although it acknowledged the rationality and competitiveness of RIL's pricing formula for KG-D6 gas. An Empowered Group of Ministers, set up to look into the matter, will also meet on Tuesday to discuss the issue.
Prasad said any fresh bidding process for price discovery would distort market and lead to cartelization "as bidding will be now done under a pre-conceived allocation mechanism under a so called utilization policy".
"In case the government does declare a policy on allocation for certain sectors or companies it would lead to cartelisation by parties and not constitute a process of arms length price discovery in as much as the price that the favoured allottees of gas would be willing to pay would never be reflective of true market price of gas," he said.
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