RIL changes contracts, price to rise 10% over new rate of $8.3

Since gas in its liquid form (liquefied natural gas or LNG) is imported into India on GCV basis, RIL is using the same logic to price gas from April 1, sources said.

Currently, most of the domestically produced gas is priced on NCV basis.

Email sent to RIL seeking comments remained unanswered.

Sources said the Fertilizer Association of India (FAI) has written a letter to the fertiliser ministry raising concerns about the proposed GSPA. The fertiliser ministry has taken this up with the Oil Ministry.

As per preliminary calculations made by the oil ministry, the new rate in April will be $8.3 per mmBtu. But the ministry is unhappy with the rate and has asked for reworking of some of the numbers.

Gas accounts for nearly 80 per cent of the production cost of urea. An increase of $1 per mmBtu in gas price translates into an enhanced cost of production of about Rs 1,369 per ton. For 18 million tons of urea produced from gas, $1 per mmBtu price increase translates into an increase in cost of almost Rs 2,465.1 crore.

A $4 per mmBtu increase in rate would mean Rs 9,860.4 crore increase in cost of production and using GCV method would mean a further Rs 2,046 crore increase in cost.