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Finance Ministry pitches $4.2 for KG D6 block gas
In a formal note, the ministry has now asked the Petroleum and Natural Gas Ministry to take appropriate steps to ensure that the Mukesh Ambani-owned RIL receives only the old price until such time it delivers the shortfall it was contractually obliged to supply from its KG D6 field but failed to, citing technical difficulties. The Finance Ministry note appends two media reports, including The Hindus editorial of June 29 ( A very reliable formula ), which proposed a number of measures to keep Reliances windfall gains in check. Referring to the price for gas from the KG D6 block, the July 5 note of the ministrys Department of Expenditure, endorses verbatim several of The Hindus suggestions: “Once RIL overcomes the technical difficulty of producing gas at the KG D6 field, the government must ensure the company delivers the shortfall it still owes at the old price of $4.2 rather than getting the benefit of the new price. RIL is presently producing 14 mmscmd of gas from its KG D6 field against the contracted production of 80 mmscmd for the current year, adversely impacting power, fertilizer, LPG, piped natural gas and other industrial sectors. The Finance Ministry has also backed the editorials suggestion that there be a cap under the new pricing formula: It cannot be that gas producers will reap unlimited gains in the case of an upswing in global prices; any upside has to be capped, its note states. The government must also subject gas producers to closer regulation, especially on the aspects of cost recovery and technical parameters related to production, it adds.