Penalty and Surprise: Modi Govt acts against Mukesh Ambani's Reliance, Kejriwal shocked

Published: Tuesday, July 15, 2014, 15:57 [IST]

New Delhi, July 15: Hours after an announcement by Prime Minister Narendra Modi govt against Mukesh Ambani's Reliance, former Delhi Chief Minister Arvind Kejriwal on Monday, July 14 hinted that he has been smelling something fishy in the case.

Raising questions regarding the central government's decision of penalising Reliance in connection with KG basin, Kejriwal asked what made Modi government take such a step.

The Central government, unlike the previous government, took a strong step against Reliance as it slapped an additional penalty of USD 579 million on Reliance Industries for producing less than targeted natural gas from its KG-D6 block.

Reliance fined for producing less than targeted natural gas from its KG-D6 block

In a series of tweets on the micro-blogging site Twitter, Kejriwal wrote that he was taken by surprise to know that Modi government has imposed a penalty on Reliance.

During his speech in the Parliament, Dharmendra Pradhan, the Union Oil Minister, on Monday informed the House that penalty has been imposed on Reliance Industries.

With this, the total penalty on RIL for missing the target in four fiscal years beginning April 1, 2010 now stands at a cumulative USD 2.376 billion, the Minister informed the Lok Sabha on Monday.

The penalty is in the form of disallowing costs incurred. The Production Sharing Contract (PSC) allows RIL and its partners BP Plc and Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government.

In a written reply to a question, Pradhan said gas output from the Dhirubhai-1 and 3 gas field in the eastern offshore KG-D6 block was supposed to be 80 million standard cubic meters per day but actual production was only 35.33 mmscmd in 2011-12, 20.88 mmscmd in 2012-13 and 9.77 mmscmd in 2013-14. This year the output has been only 8.05 mmscmd.

His ministry on July 10 issued a notice disallowing USD 579 million in cost for output lagging targets in 2013-14.

The government had previously issued a notice to RIL disallowing a total of USD 1.797 billion in costs for falling short of production during 2010-11 (USD 457 million), 2011-12 (USD 548 million) and 2012-13 (USD 792 million). Pradhan said the issue is currently under arbitration.

How Kejriwal reacted after govt's announcement: