Reliance Industries may pay Rs 3,000 crore in KG-D6 dispute

Reliance Industries may pay Rs 3,000 crore in KG-D6 dispute

Reliance Industries (RIL) has estimated that it could pay a maximum of $ 400 million (about Rs 3,000 crore) over the past nine years, over allegations of failing to comply with an approved investment plan and exploiting capacity in the KG-D6 sector. 

If we go into detail, RIL started production in 2010 from the Dhirubhai-1 and 3 natural gas fields in the KG-D6 block, but its production capacity has declined since the second year. Production has been suspended from February this year, much earlier than anticipated. The government has refused to sanction more than $ 3 billion (about Rs. 22,500 crores), alleging that it did not comply with the company's approved development plan. 

On this, the RIL approached the arbitration court against the government. Meanwhile, RIL, which recently received a massive rights issue, referred to the notice issued by the central government to its partners in the KG-D6 block in its offer document. It said the government was not allowing for the recovery of costs and demanded an additional share of the profits, accusing it of using less capacity than the development plan. 

However, the RIL said that there was nowhere in the agreement that the central government would not allow the recovery of the expenditure on the basis of low-efficiency utilization. Under the Product Sharing Contract-PSC, contractors share profits only after deducting their capital and operating expenses. The government, however, did not allow for recovery of expenses but requested the government to issue arbitration notice on November 23, 2011, demanding higher dividends. Both parties have argued before the Trishabhya Arbitration Tribunal. Perhaps the final arguments are likely to be between September and December 2021. 

The RIL is expected to be in the range of $ 200-400 million (about Rs.1,500-3,000 crore) if the court orders the government to pay an additional dividend.