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Arbitration and Gas Price Disputes

Monday, May, 23, 2016


Reliance Industries Ltd (RIL) is considering whether it should withdraw pending arbitration with the government concerning gas prices. Withdrawal could result in RIL benefiting from higher prices. According to information from the company, its top management officials are considering two divergent views concerning arbitration. This could double gas prices and end the two year old case. At the moment, officials have not made a decision and it seems they are split on whether it is more benefit to continue the case or ending it. Both sides were presented to top officials and the board of directors will be responsible for making the final decision.

 

In March, the Cabinet decided a liberal price policy would occur only if it ended or withdrew disputes filed against government entities concerning gas prices. RIL execs met with Oil Minister Dharmendra Pradhan in April, which had many wondering if the company had begun the process of withdrawing arbitration.

 

As of January 2014 under the previous government, domestic natural gas price guidelines would have doubled, but the Election Commission did not allow the implementation of those guidelines. In May, RIL and Niko and BP took the government to court for not implementing the price increase.

 

A new government came into power in May 2014 and deferred the revision. In March, it launched what it considered crucial reforms for the oil and gas sector, based on the Petroleum Planning and Analysis Cell.

 

Sources close to RIL deny the firm discussed withdraw in their most recent April meeting, but did say the company is moving forward with its development plan for the KG Basin project.