RIL to get benefit of free gas pricing only if it withdraws arbitration: Official

The company had in May 2014 taken the govt to arbitration seeking implementation of a higher gas price

The government's move to free gas pricing for undeveloped gas fields in difficult areas will not apply to Reliance Industries' KG-D6 finds unless the Mukesh Ambani firm withdraws arbitration challenging the government's authority to decide rates.

The Cabinet headed by Prime Minister Narendra Modi had Thursday decided that the marketing freedom subject to a cap based on alternative fuel will not be applicable to discoveries that are under litigation or arbitration.

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"This decision primarily pertains to RIL's KG-D6 finds," a senior government official said.

RIL had in May 2014 dragged the government to arbitration challenging its decision not to implement the Rangarajan Committee recommendation of doubling rates to $8.4 per million British thermal unit (mmBtu).

"They can get benefit of the decision only (if) they withdraw the arbitration," the official said. "We are not saying they should withdraw arbitration against disallowance of cost or taking away of KG-D6 area, but the legal suit challenging the government's authority to fix rates has to be withdrawn."

RIL and its partners in KG-D6 block, BP of the UK and Canada's Niko Resources had in May 2014 taken the government to arbitration seeking implementation of a higher gas price.

The government had in June of 2013 approved a formula, linking prices domestically produced gas with global benchmarks, which could have nearly doubled gas prices from the then prevalent $4.20 per mmBtu from April 1, 2014.

The Election Commission, however, in March 2014 asked government to defer an increase until the completion of Lok Sabha polls.

RIL challenged the freeze and filed an arbitration questioning the government's authority to fix rates.