Government Recovers Rs 368 Cr Additional Profit From Reliance Industries
Government has recovered nearly a third of the $195.34 million additional profit it is claiming from Reliance Industries’ KG-D6 field as a result of penalty imposed for gas output lagging targets, Oil Minister Dharmendra Pradhan said on Monday.
With gas output from RIL’s main D1&D3 fields in eastern offshore KG-D6 block dipping to one-tenth of the target of 80 million standard cubic meters per day, the government imposed a penalty by disallowing $2.376 billion of the cost.
“As a result of disallowance of a portion of contract cost, contract is liable to pay additional profit petroleum of $195.34 million (Rs 1,211.1 crore) to the government for the period up to the year 2013-14,” he said.
According to the contract, an operator is entitled to recover all his capital and operating expenditure from sale of oil and gas before sharing profit with the government in a pre-determined ratio. When a certain cost is disallowed, the profit available for sharing with the government goes up.
The government effected the recovery of the additional profit it deems as due by disallowing RIL and its partners an increase in gas price that was effected from last November.
It asked buyers of KG-D6 gas to continue paying RIL the old rate of $4.20 per million British thermal unit and deposit the incremental price to a gas pool account maintained by GAIL, Mr Pradhan said in a written reply to a question in the Lok Sabha.
GAIL collected the amount from RIL and deposited it with the government.
“Further, Government has directed GAIL on March 2, 2015 to deposit the amount being credited to the gas pool account maintained by GAIL with effect from November 1, 2014, to the Government’s exchequer towards the additional profit petroleum of $195.34 million due and payable by the contractor,” he said.
Accordingly, GAIL has “despited Rs 367.86 crore towards the additional profit petroleum with Government of India till June 2015”, he said.
Gas output from the Dhirubhai-1 and 3 gas field in the eastern offshore KG-D6 block was supposed to be 80 mmscmd but actual production was only 35.33 mmscmd in 2011-12, 20.88 mmscmd in 2012-13 and 9.77 mmscmd in 2013-14. The output has been around 8 mmscmd in 2014-15 and the current fiscal year.
Blaming the shortfall in production to non-drilling of committed number of wells, the government first disallowed $1.797 billion in costs for falling short of production during 2010-11 ($457 million), 2011-12 ($548 million) and 2012-13 ($792 million). In July last year, it further disallowed $579 million in cost for output lagging targets in 2013-14.
RIL has initiated arbitration against the government disputing the grounds of fall in output.
Mr Pradhan said the government has earned a royalty of Rs 2,911.64 crore on KG-D6 block since it started production in April 2009.
