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Home News Power Sector News KG-D6 gas price review unlikely before 2014

KG-D6 gas price review unlikely before 2014

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KG-D6Activist-turned-politician Arvind Kejriwal's media address on 31-10-2012 once again brought the KG-D6 imbroglio to the fore. The next pricing review of gas from the block, located off the Andhra Pradesh coast, is scheduled for 2014. Reliance Industries Ltd (RIL), which operates the block, has been pushing for an earlier review and pricing revision.

The government has so far rejected the company's demand. Raising the price of gas is certain to prove even more difficult after Kejriwal's charges.

RIL currently sells gas at $4.2 per million metric British thermal unit (mmBtu). This rate was approved by the government based on the price of crude oil in 2008, when it cost $60 a barrel. Crude oil prices have jumped since then, to $100-110 a barrel.

Reliance has argued that the price of imported liquefied natural gas (LNG) is much higher than what the company gets. Imported LNG costs as much as $14.5 per mmBtu, when the price of crude oil is at $125 per barrel.

According to government policy, power and fertiliser units have the first priority in allocation of domestic natural gas. Any gas price revision will increase the cost of producing electricity and fertiliser, an important farm input, and the government can ill afford this. It is therefore unlikely that any revision will happen before the 2014 general elections.

On Wednesday, Kejriwal had alleged that the ruling United Progressive Alliance government and its predecessor, the National Democratic Alliance, had repeatedly favoured RIL.

He also said S. Jaipal Reddy's ouster from the petroleum ministry was an effort to please the private-sector energy company.

Source- India Today


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