1. You Are At:
  2. Home
  3. Business News
  4. Govt slaps Rs 3,500 crore additional penalty on Reliance Industries

Govt slaps Rs 3,500 crore additional penalty on Reliance Industries

New Delhi: The government on Monday imposed an additional penalty of USD 579 million on Mukesh Ambani led- Reliance Industries for producing less -than targeted natural gas from its eastern offshore KG-D6 block.The total penalty

India TV News Desk [ Updated: July 15, 2014 10:09 IST ]
govt slaps rs 3 500 crore additional penalty on reliance
govt slaps rs 3 500 crore additional penalty on reliance industries

New Delhi: The government on Monday imposed an additional penalty of USD 579 million on Mukesh Ambani led- Reliance Industries for producing less -than targeted natural gas from its eastern offshore KG-D6 block.


The total penalty now stands at USD 2.37 billion. The penalty in the form of disallowing costs incurred on the field is for missing the target in 2013-14.

The government had previously issued a notice to RIL disallowing a total of USD 1.797 billion in costs for falling short of production during 2010-11 (USD 457 million), 2011-12 (USD 548 million) and 2012-13 (USD 792 million).

Production from the main gas fields in the KG-D6 block has dropped to about a 10th of the planned 80 million standard cubic meters per day. The fall in output meant that facilities created at huge investment went unutilised.

The production sharing contract allows RIL and its partners BP Plc and Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government.

The creation of excess or unutilised infrastructure impacts the government's profit share and this is sought to be corrected by disallowing part of the expenses incurred.
 
The ministry believes that USD 115 million in additional profit share would have accrued to the government from disallowing the cost in 2013-14.
 
To recover this additional profit share, it has proposed that state-run companies deduct USD 115 million from payments due to RIL for crude oil and gas bought from KG-D6 block.
 
Once Pradhan approves, the ministry will instruct Chennai Petroleum and Hindustan Petroleum, which buy crude oil from the KG-D6 block, and GAIL India, which purchases KG-D6 gas, to remit
 
USD 115 million deducted from payments to RIL and deposit the amount in a government account, the source said.
 
The move comes after RIL did not agree to deduct the disallowed costs from total expenses incurred before calculating the government's share of profit petroleum.
 
The government's profit share would rise by USD 195 million if all of the USD 2.375 billion of disallowed costs is deducted from expenses incurred.
 

Promoted Content