Govt says no to RIL gas sale to Anil's Group

NEW DELHI: Petroleum Ministry has rejected Reliance Industries' plan to sell natural gas to Anil Ambani Group firm Reliance Natural Resources Ltd at less than half the current market price.

Petroleum Minister Murli Deora yesterday shot down RIL's sale price of $ 2.34 per million British thermal unit (mBtu), with a ministry note stating that the "proposal of RIL on valuation of gas proposed to be RNRL does not meet the criteria laid down in the Production Sharing Contract (of the RIL gas field)."

Gas supply and pricing appeared to be the bone of contention between the two Ambani factions leading to public bickering and allegations of violation of the June 2005 family settlement agreement. The gas supply agreement was also considered crucial for the fate of ADAG's 7,480 MW Dadri power project in Uttar Pradesh.

Sources said the ministry opposed the sale as the price was not arrived at arms length and would have lead to huge financial loss to government in the form of lower royalty and lower profit petroleum.

RIL is selling gas from its Panna/Mukta and Tapti fields at $4.75 per mBtu.