The Finance Ministry has cautioned the Petroleum Ministry against irregularities and contractual violationsby Mukesh Ambani-led Reliance Industries limited in production of natural gas from KG Basin.
The Finance Ministry has expressed concern over falling production of gas and blamed Reliance Industries limited (RIl) for not meeting its contractual obligations.
The Ministry has also advised deferring of the
implementation of enhanced price for gas produced from KG Basin.
In an Office Memorandum, the Finance Ministry said violations by RIl invited provisions that could lead to termination of contracts and pointed to the related terms in the agreement with the company.
Releasing the Office Memorandum to the media, CPI leader Gurudas Dasgupta on Friday urged Prime Minister Manmohan Singh to intervene in the matter to
stop Petroleum Minister Veerappa Moily’s “dubious designs to award high price to Ambani’s RIl.”
“The Ministry of Finance agrees that the question of price fixation will be deferred until determination of reasons for decline in production. The pricing of gas from future production from D1/D3 (of KG Basin) fields will also be contingent upon this determination,” said the Office Memorandum dated November 26, issued to Petroleum Ministry with the approval of Finance Minister P Chidambaram.
The seven-page communication outlines the RIl’s contractual violations on decrease in production and non-adherence to rulings and guidelines of the regulator, Directorate-General of Hydrocarbons (DGH).
“It may be noted that many defaults and breach of contractual terms were sent out by the Government in its notice to the contractor (RIl) while disallowing recovery of cumulative costs for failure to meet the production of targets set under the AIDP. The fact that the contractor was in default of the contractual obligations in well documented and supported by the findings/advice of DGH and the independent expert,” said the Finance Ministry.
The Finance Ministry also disagreed with Moily and RIl on reasons for the fall in gas production.
“It is the Government’s stated position that the shortfall in gas is due to breach of contractual terms by the contractor; the premise is also supported by an independent expert,” the Finance Ministry stated.
The Finance Ministry also said there was nothing on record to suggest that RIl made efforts to arrest the falling gas production by taking adequate remedial measures, as advised by various agencies, including the DGH.
“This Office Memorandum exposes the dubious designs of Moily to favour Mukesh Ambani. The Prime Minister should intervene and stop granting increased gas price to Reliance. This contract of the company should be terminated and a fine for loss in production should be imposed,” said Dasgupta, who has already challenged the controversial gas pricing in the Supreme Court.