Fertiliser firms cry foul over RIL gas contract

Weeks before India's biggest gas field is to go on stream off the Andhra coast, the government finds itself in a spot as fertiliser companies are refusing to ink deals with Reliance Industries Ltd -- the operator -- saying the draft of the agreement is heavily loaded in favour of Mukesh Ambani-controlled company and puts conditions that do not suit Indian entities. In a letter to the fertilisers secretary Atul Chaturvedi, the Fertiliser Association of India (FAI) has sought government intervention in the matter. The letter raises eight objections to the draft agreement, the major ones being: seeking option of payment in dollars in an offshore account ; no liability on RIL in case of short-supply and restricting the source of gas to only two fields instead of the entire D6 acreage. RIL sources denied buyers were refusing to sign and said "clarifications have been sought and we are working with the companies to resolve issues... The offshore account is just an enabling clause and all hydrocarbons except those under government control is denominated in dollar terms as India is yet to have a developed oil and gas market''. The FAI letter says not many Indian buyers may be able "to commit payment in dollars since they are dealing with resident companies...and all payments should be made in rupees''. Fertiliser industry sources also pointed out that a dollar denomination will make gas buyers pay more in rupee due to the Greenback's appreciation. The dollar was around Rs 40 when the government approved RIL's pricing formula, according to which gas has to be sold at $4.2 mBtu (million British thermal unit) plus taxes and transportation charges. The letter objects to RIL limiting the supply source to Dhirubhai-1 and 2 fields which will limit the supplies. Besides, insistence on separate contracts for transporting gas -- either with RIL's pipeline subsidiary or state-run GAIL -- is operationally difficult and make buyers liable for all penalties in case of conflicts among entities in the supply chain.