Govt develops cold feet over action against RIL

New Delhi: Faced with the prospect of a long-drawn legal battlewithRelianceIndustries Ltd (RIL), the government appears to have developed cold feet over taking action against the Mukesh Ambani-led company for a drastic fall in gas output from its showcase Andhra offshore field. The oil ministry andits regulatory arm for explorers, Directorate General of Hydrocarbons, has been working on their plan to reclaim about $1.8 billion of the $5 billion investment in the field that RIL had recouped from gassales. 

    The ministry was alsolooking at changing the RIL's contract with the state that allows thecompany tofirst recover its total investment before sharing profit with the government. The ministry wanted to bring in provisions to limit the recovery in some proportion to the output committed while seeking approval of investment plans. 
    Now, the ministry appears to have put such steps on the backburner in the wake of an arbitration notice that RIL served on November 24. "We are not taking action. We have, however, begun to look at the quantum of fall in output. In the meantime, RIL has given a notice of arbitration," Reddy said. "There will be no change in thePSC(production sharing contract with RIL for the field)... If there are changes (in the PSC), they will be introduced from future NELP (acreage auction) rounds. They will have prospective effect," he added. 
    "Thereis a provision in the PSCfor arbitration in caseof a dispute. Therefore, I see no problem in this. However, we needtoconsult andseek advise from others... The interpretation of PSC(if it allows restriction of cost-recovery) will be among the issues for arbitration, apart from the cost," he said. Last Monday, minister of statefor petroleum RPN Singh too had struck a similar note. "We have got a letter from RIL. Whatever issues have been raised, we would study and whatever needstobedone,will be done... We are clearly not rushing into (arbitration)... we will look into issues raised by RIL," hehadsaid.

MASTER STROKE: Mukesh Ambani-led RIL's arbitration notice seems to have stopped the govt