Govt Slaps Rs 2500 Crore Additional Penalty On Reliance Industries

The Central Government had slapped an additional fine of $380 million (around Rs 2,500 crore) on Reliance Industries and its partners last month for producing less than targeted natural gas from the eastern offshore of KG-D6 fields (Krishna Godavari basin).

With this, the total penalty, which is in form of disallowing recovery of cost incurred, for missing the target in five fiscal years beginning April 1, 2010, now stands at a cumulative $2.76 billion.

The Production Sharing Contract (PSC) allows Reliance India Limited and its partners BP Plc of the UK and Canada’s Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government.

“Up to financial year 2013-14 the cost recovery proposed to be disallowed was USD 2.376 billion and consequent demand of Government of India share of additional profit petroleum of $195.3 million on cumulative basis.”

“On June 3, 2016, the company received a revised claim up to year 2014-15 with a disallowance of USD 2.756 billion on cumulative basis and consequent demand of Government of India share of additional profit petroleum of USD 246.9 million, also on cumulative basis,” RIL said in a regulatory filing.

Gas output from Dhirubhai-1 and 3 gas field in the eastern offshore KG-D6 block was supposed to be 80 million standard cubic meters per day but actual production was only 35.33 mmscmd in 2011-12, 20.88 mmscmd in 2012-13 and 9.77 mmscmd in 2013-14. The output has been around 8 mmscmd in subsequent years.

The output was behind target in 2015-16 as well and the government is yet to issue a cost disallowance notice for that. So far, no confirmation has been received whether RIL has successfully paid the total sum of the penalty or not.