The Petroleum and Natural Gas Ministry, on its part, is of the view that the net effect of the RIL price will be a sharp increase in subsidy outgo and minuscule growth in Government revenues due to sharing based on production-linked payment.

Further, while discovering the pricing, the bidders who participated were mostly from sectors such as ceramics, city gas distribution, textiles and chemical plants, it said.

There is no fertiliser, LPG or power company (which supplies power to state utilities on the basis of a long-term power purchase agreement). The gas utilisation policy accords top priority to these sectors.

The proposal of the contractor (RIL) suffers from serious infirmity, as it would be supplying more to non-core sectors, the Ministry felt.

It said the gas, if supplied to any fertiliser unit, would mean an additional fertiliser subsidy burden. In its note circulated in September, the Ministry said an increase in price by $1/mmBtu for one mmscmd of gas will increase the subsidy burden by about Rs 64 crore annually.

If RIL’s proposal is accepted, the note said, it would imply an increase of $ 8.73/mmBtu (on crude oil prices of $100/barrel) over the current level of $4.2/mmBtu, resulting in an increase in subsidy of about Rs 1,637 crore annually.

Over the life of the project (over 30 years), this would translate into an increase of Rs 49,111 crore.

Against this, the increase in Central Government revenues will be only Rs 56 crore annually and Rs 1,684 crore over the life of the project, the Ministry said.

According to sources, the Ministry had wanted a Committee of Secretaries, and subsequently the Cabinet, to take a final call on the issue.

> richa.mishra@thehindu.co.in

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