Failure to implement the increase is preventing the companies from sanctioning investments of almost $4 billion this year, they said in an e-mailed joint statement today. Reliance, controlled by India’s richest man Mukesh Ambani, operates the country’s biggest natural gas deposit, the KG-D6 field in the Bay of Bengal.
“The continuing delay on part of the government of India in notifying the price in accordance with the approved formula for the gas to be sold has left the parties with no other option but to pursue this course of action,” they said.
Gas is used mainly for power and fertilizer production in energy-deficient India, and pricing is a sensitive topic given more than 800 million of its population live on less than $2 a day. Anti-graft politician Arvind Kejriwal, former chief minister of Delhi, has attacked the planned increase as unfair for consumers facing inflation exceeding 8 percent.
The cost of living and a slowdown in India’s economy are pivotal issues in the nation’s general election, which began April 7 and concludes May 16. The Election Commission in March told the government to defer the price rise until the vote ends.
The Cabinet last year approved a new formula for calculating gas prices starting April 1, 2014, almost doubling rates for locally produced fuel. Gas from the KG-D6 block is currently sold at $4.2 per million British thermal units.
The companies said in the statement that clarity in pricing is needed for $8 billion to $10 billion of investment over the next few years that aims to “significantly increase production” from the KG-D6 block.
Output there has slumped, with Reliance saying the gas is more difficult to extract than previously anticipated. Production has dropped to about 10 million cubic meters a day from more than 60 million in 2010.
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