The Committee of Secretaries (CoS) on natural gas has agreed, in principle, to the government taking its share of profit from the Reliance D6 gas block in kind, instead of cash, for supply to fertiliser plants at a subsidised price. The nod at the July 10 CoS meeting is for lifting a fixed volume averaged throughout the block’s life as its share of “profit gas” for the entire duration of gas production. Profit gas is the revenue after deducting exploration and development costs of a block.

According to sources, this offtake could be 20 million standard cubic metres of gas per day (MSCMD), which would subsume the future profits of government at different investment multiples. The Centre’s take from profit gas rises as operator Reliance recovers its cost and earns more profit, measured as multiples of initial investment. Sans this average lifting, profit gas owed to government would vary between 1 MSCMD initially and 50 MSCMD or more after the seventh year, leading to problems in planning the pipeline size and committing long-term supply to buyers, the sources added.

The CoS would have approved the profit-gas-in-kind earlier but the order was deferred after petroleum secretary M S Srinivasan assured that there was no hurry to catch the June 30 deadline. “The ministry would have acted to formally communicate the option in case there was an urgency. However, in view of the clear understanding with the contractor (Reliance), the government may notify its entitlement to receive profit gas in kind after deciding the pricing formula of natural gas,” Srinivasan had informed the CoS on June 29.

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