Oil Min seeks legal opinion on levying $781m penalty on RIL
Sep 12 2013 , New Delhi
Oil Secretary Vivek Rae said the government has already issued a notice to RIL for a $ 1.005 billion penalty for shortfall in production during 2010-11 and 2011-12. The Mukesh Ambani-run firm has initiated arbitration against the levy.
"We have already issued a notice for the penalty of $ 1 billion. For 2012-13, we are examining what needs to be done, whether the higher penalty is to be imposed and if so in what manner. We are seeking the advise of the Law Ministry right now," he told reporters here.
The Directorate General of Hydrocarbons had in July recommended to the Oil Ministry that $ 781 million of the cost RIL has incurred in KG-D6 fields be disallowed for producing only an average of 26.07 million cubic meters per day of gas as against the target of 86.73 mmcmd in 2012-13.
This will be in addition to $ 1.005 billion in cost recovery already disallowed for output falling short of targets during 2010-11 and 2011-12.
The arbitration has not begun because the two arbitrators appointed by RIL and the government are yet to agree on a neutral presiding judge for the proceedings.
CPI leader Gurudas Dasgupta has previously alleged that Oil Minister M Veerappa Moily was scuttling the arbitration proceedings but when RIL moved the Supreme Court seeking appointment of the third arbitrator at the earliest, he too moved the Apex Court seeking stay on the arbitration proceedings.
Officials said since arbitration proceedings on the previous penalty issue are yet to commence, it was thought prudent to seek opinion of the Law Ministry on levying further penalty.
DGH blames RIL for not drilling its committed quota of wells for the fall in production that has resulted in a large chunk of production facilities lying unused or under-utilised.
RIL has built infrastructure to handle 80 mmscmd of output but is currently producing less than 14 mmscmd.
As per the production sharing contract, RIL and its partners BP Plc and Niko Resources are allowed to deduct all of the capital and operating expenses from sale of gas before sharing profits with the government. Creation of excess or unutilised infrastructure impacts government's profit share and this is being sought to be corrected by disallowing part of the cost.
DGH, the official said, stated that after cost disallowance, RIL would be required to pay $ 114 million in additional profit petroleum to the government for 2012-13 in addition to $ 103 million that was already due.