Reliance Industries and its foreign partners in the KG-D6 block could end up selling gas to fertiliser units without any new contractual agreement till the new government is in place.

Sources in the fertiliser industry said any new sale agreement with the supplier would be possible only after the new government takes charge.

Till then, RIL will continue to sell gas according to the old contract which expired on March 31 at a price of $4.2/unit (gas is measured in million British thermal units).

RIL has been asked by the Ministry for Petroleum & Natural Gas to continue with the supplies. The new agreement was for the continued supplies, even after the previous five-year contract expired on March 31. But the buyers and the seller had different interpretations of the effective date of the soon-to-be-notified new gas price.

“We are supplying without any contract or guarantee. There is no fall-back assurance or payment security. It is not that we do not trust (the buyers)…but, the Petroleum & Natural Gas Ministry is also not doing anything,” said sources in RIL.

Status quo on supplies The Ministry felt the details of the contract should be worked out between the buyers and the seller as it is a commercial issue.

Sources in the fertiliser industry said the status quo on supplies was being maintained.

The D-1, D-3 and MA fields in the block currently produce gas slightly below the 13-million standard cubic metres a day output.

To avoid any controversy, the Ministry had sought the Election Commission’s nod for notifying the new gas price, as the country had gone into polls.

The new price was expected to be almost double the existing gas rates. At present, RIL and its partners in the block – BP and Niko – have over 50 agreements, of which, 16 are live and with fertiliser companies.

These agreements were signed in 2009 and expired on March 31.

Following the Ministry’s directive, RIL has been supplying gas to fertiliser plants, but the two (buyers and the seller) are yet to sign the fresh term contracts.

Financial outgo According to estimates, the increased price would mean a rise in financial outgo from the Fertiliser Ministry for urea subsidy.

The overall impact of every dollar increase will be ₹3,155 crore annually from 2013-14 for 23 million tonne urea production, and will increase to ₹4,144 crore annually for 32 million tonne production from 2017-18.

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