RIL, Oil Ministry headed for a showdown

There is a new milestone in the ongoing tussle between Reliance Industries and Petroleum Ministry. The disagreement escalated on 2 May, 2012, following a notice from the ministry to Reliance. The ministry said the government would disallow recovery of additional 18 per cent of expenses incurred by the company in developing KG-D6 block in 2010-11 and 2011-12 for its failure to control the continuous dip in production.

This will in a way help RIL to take things forward on its desire to start arbitration proceedings against the government. A fortnight back, it moved apex court seeking appointment of an arbitrator. RIL served the notice to the ministry on 23 November 2011. But the ministry instead of appointing any arbitrator from its side, as per the contractual arbitration, chose to ask RIL to withdraw the notice, as the company's arbitration notice was based on speculation in the media on what the government would do. But now, since the ministry has taken the decision, RIL's case for seeking arbitration gets more weight.

However, there is a flipside too. A day after assuming the additional charge of Director General of Directorate General of Hydrocarbons, the joint secretary (exploration) A Giridhar slapped this notice. His predecessor, SK Srivastava, during his tenure as Director General of Hydrocarbons took on RIL and maintained that it was not following the field development plan, resulting in the production dip. He was backed by officials in the ministry and also Oil Minister S Jaipal Reddy. Now, with this, it looks like the battle is set to continue.