YSR May Turn Off RIL Gas Tap In Andhra

NEW DELHI: Reliance Industries' (RIL) retail fiasco in Uttar Pradesh may be repeated in Andhra Pradesh, this time for gas.

Chief Minister YSR Reddy has cautioned that RIL would face UP-kind of opposition — where RIL retail stores were forced to shut down — unless the state's demand for KG basin gas is met and the Centre approves AP's proposed city gas pipeline project.

In a meeting with petroleum minister Murli Deora on Wednesday, Mr Reddy is understood to have said the delays in granting approval to the proposed pipeline or denial of gas to Andhra Pradesh would lead to mass opposition, similar to what had happened in Uttar Pradesh against Reliance Fresh stores.

Mr Reddy met Mr Deora to register protest against delay in granting permission to the state for laying 2,000-km pipeline. The state has been awaiting the Centre’s nod for nine months.

The Andhra Pradesh government’s veiled threat, which follows close on the heels of the Uttar Pradesh government’s decision to disallow opening of retail stores, is expected to have major implications for investors. The production-sharing contract allows the gas producer, RIL, to have complete freedom in marketing the gas.

Claims like the one being made by Andhra Pradesh are unlikely to have legal standing. Even on the pipeline issue, it is not within the state jurisdiction to have a mandate on pipelines including city gas distribution pipelines. This has been ordained in an earlier ruling of the Supreme Court. Further, all decisions on pipelines now rest completely with the newly-constituted Petroleum & Natural Gas Regulatory Board (PNGRB).

It is learnt Mr Reddy was not satisfied with Mr Deora’s answer that his proposal (of laying pipeline) would be referred to PNGRB. Mr Reddy said the Centre was already late to in granting approval, and referring the proposal to PNGRB would delay the project. The state is seeking the Centre’s approval for laying 2,000-km gas transmission pipeline network across 23 cities in the state.

The timing of Mr Reddy’s visit is stated to be significant as the empowered group of ministers (EGoM) on natural gas pricing and utilisation is likely to meet for the fourth time in early October. The date of the meeting is expected to be finalised soon after the return of its chairman and external affairs minister Pranab Mukherjee from foreign tour.

The EGoM — which had approved RIL’s KG basin gas pricing formula with certain modifications on September 12 — is likely to meet soon to resolve issues related to natural gas utilisation policy.

It is understood from official sources that Andhra Pradesh has broadly accepted the KG basin’s gas price of $4.20 per mmBtu as discovered through the modified formula, approved by the EGoM. “Mr Reddy didn’t raise the issue of gas pricing in the meeting with the petroleum minister,” an official said.

The state has incorporated Krishna Godavari Gas Network (KGGNL) to implement the city gas pipeline project in the state. Andhra Pradesh government, GSPC and IDFC are the shareholders in KGGNL