RIL challenges government norms for CBM

Reliance Industries Ltd (RIL) has questioned India’s oil ministry on pricing and utilisation of coal bed methane (CBM) and said the fresh guideline were against the government's own decision and violated terms of the contract with the state, the Times of India said Wednesday.

RIL said fresh guidelines circulated recently adversely affected the company's contractual rights and amount to unilaterally attempt to amend the contracts.

Reliance has two CBM blocks - Sohagpur West and East in Madhya Pradesh and Chattisgarh.

RIL has mainly objected to the condition in the guideline restricting competition for discovering the fuel's market price to a limited number of coal bed gas users identified by the government. This will not allow discovery of a competitive arms-length pricing and goes against the terms of the contract.

"While the government may wish to facilitate supply of gas to some sectors, the approval powers of the government cannot be used to suppress prices of CBM gas below what the market can fetch by restricting price discovery itself. Use of its powers of approval (of the basis/formula of pricing) cannot be used by the government to facilitate the administration of subsidies through preferential pricing to chosen sectors," RIL said.

The company said that it has no objection to sell to any customer (priority or others), provided they are willing to pay market prices discovered by the contractor as required by the contract.