RIL pricing formula not OK: CoS

NEW DELHI: The committee of secretaries (CoS), which has submitted its report on the vexed issue of pricing of RIL’s KG Basin gas, has cautioned the petroleum ministry against approving the company’s market prices before a final decision is taken on a transparent gas allocation and utilisation policy.

The CoS report, submitted on Friday, has questioned RIL’s gas pricing and bidding process. It said the gas pricing formula, submitted by RIL, suffers from several infirmities in respect of both the formula employed and the bidding process. It advised the policy should be formulated by the petroleum ministry in consultation with other arms of the government, including the Planning Commission and the power and fertiliser ministries.

The report also cautioned the government against approving the formula as it would weaken NTPC’s court case against RIL. RIL is entangled in a legal battle with gas consumers NTPC and Reliance Natural Resources (RNRL). The consumers allege RIL is backing out of contracts signed earlier for supplying gas.

The report views the government’s approval of RIL’s formula at this juncture would be detrimental for NTPC. This comes even as the law ministry has said the government should go ahead with the approval notwithstanding the pending court cases.

The pricing formula submitted by RIL is not based on the competitive market environment and unfairly exploits a situation of stranded assets of the major consuming sector, the report says.

The COS report is a part of the inputs that was considered by PMO before it advised the petroleum ministry to take action. The prime minister’s Economic Advisory Council is also finalising a report on the entire gas pricing issue.