Government slaps $579 million penalty on India's Reliance16 july 2014, 10:45
The Indian government has announced a new penalty of $579 million on the country's largest private company, Reliance Industries, for failing to meet commitments to supply gas for the fourth year in a row, AFP reports.
Oil Minister Dharmendra Pradhan told parliament on Monday that Reliance supplied only 9.77 million standard cubic meters per day of gas from its KG-D6 gas field in the Bay of Bengal last year, a fraction of its target of 80 million.
Under the terms of the contract, Reliance can deduct all of its capital and operating expenses before sharing profits with the government.
The penalty reduces the amount of expenses Reliance can deduct by $579 million, with total fines of this kind now totalling $2.4 billion since 2010, the minister was quoted as saying by the Press Trust of India (PTI) news agency.
In a written reply to parliament, quoted by PTI, the Minister said Reliance "has failed to adhere to the approved field development plan in terms of drilling and putting on stream the required number of wells."
The dispute over supplies from KG-D6 is currently under arbitration, with Reliance and its British and Canadian partners BP and Niko Resources, still hopeful of a more favourable settlement.
After the penalty for the 2013/14 financial year to March 31, the government would collect additional revenues of $195 million, Pradhan said.
The new right-wing government of Narendra Modi, who was heavily backed by billionaire Reliance chairman Mukesh Ambani and his brother Anil, has apparently shown no public favours to the group so far.
It announced a further review late last month of a promise by the previous government to nearly double the price that Reliance can sell its gas from the KG-D6 basin.
In the current financial year, daily output from the basin off India's east coast has fallen further to 8.05 million standard cubic meters, the minister said.
In 2011, BP paid $7.2 billion to acquire a 30 percent stake in 21 of Reliance's oil and gas fields.
Reliance hoped then that BP's deepwater drilling expertise would give the Indian giant the skills to develop hard-to-exploit reserves and find more oil.