Oil Min hikes penalty on RIL to $1.46 billion

The oil ministry feels the drop in pressure had resulted in under-utilisation or creation of excess capacity and wants to disallow cost recovery in proportion to that

New Delhi: The oil ministry has hiked the penalty it wants to impose on Reliance Industries (RIL) and its British partner BP plc for falling natural gas output from the KG-D6 fields, by 18% to $1.46 billion, reports PTI.

The ministry had previously wanted to disallow $1.235 billion expenditure that RIL had incurred on putting production facilities at the Bay of Bengal gas fields but in the seven-page notice it sent to the company on 2 May 2012, the cost to be disallowed was put at $1.462 billion, sources privy to the development said.

The drop in reservoir pressure coupled with increased water and sand ingress has seen output from Dhirubhai-1 and 3 gas fields in the deep sea KG-DWN-98/3 or KG-D6 block fall from 53-54 million metric standard cubic meters per day (mmscmd) achieved in March 2010 to 27.5 mmscmd last month, instead of rising to projected 80 mmscmd for current year.

The ministry feels the drop in pressure had resulted in under-utilisation or creation of excess capacity and wants to disallow cost recovery in proportion to that.

The Production Sharing Contract (PSC) allows an operator to deduct all capital and operating expenses from the revenue it earns from sale of hydrocarbons—called cost recovery—before sharing profits with the government.

The notice signed by A Giridhar, joint secretary (exploration) in the ministry of petroleum and natural gas, says $457 million expenditure in 2010-11 and another $1.005 billion in 2011-12 will be disallowed for cost recovery on account of excess capacity and under-utilisation of facilities.

Sources said the ministry had previously wanted to disallow $457 million of cost recovery for 2010-11 and $778 million of cost recovery in 2011-12. The ministry and its technical arm, the Directorate General of Hydrocarbons (DGH) is to approve accounts for the two fiscal.

Anticipating such a move, RIL has in November last year slapped an arbitration notice on the ministry saying the PSC allows operators to recover 100% of the capital and operating expenditure and does not in anyway link the cost recovery to production.

The ministry has thus far tried to browbeat RIL into withdrawing the arbitration notice, saying that no dispute has arisen as yet but its notice of 2 May 2012 establishes there is a dispute over how much of cost can be recovered.

With the ministry refusing to appoint an arbitrator to resolve the issue, RIL had moved the Supreme Court requesting for appointment of arbitrators on behalf of the government.

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Kingfisher talking to tenants to avoid eviction

The cash-strapped airline has been defaulting on payments against lease rentals, oil purchases, landing and parking fee and even service tax and TDS and now two developers from Mumbai has slapped eviction notice to Kingfisher

Mumbai: Vijaya Mallaya-promoted Kingfisher Airlines continues to hit air pockets with two real estate developers from Mumbai now slapping eviction notice for allegedly defaulting on rent payments since last November, reports PTI.

The airlines sources confirmed the development and said the management is negotiating with the developers to resolve the deadlock.

The cash-strapped airline has a rented property in the Andheri suburb of the city, from where it is running a part of its operations, while the main administrative office is located at the Kingfisher House, which the promoter Mallya has been planning to monetise to raise some working capital funds for the airline.

"Senior airlines representatives are in talks with some of the developers for quite some time now to resolve the deadlock and arrive at a solution," Kingfisher Airlines sources told PTI. The airline spokesperson, however, was not available for comments.

The notice by city-based developers-- Samruddha Realtors and Dhruvam Realtors-- is understood to have been served on 11th April through their solicitors, giving a month's time to vacate the space held by the airline at Andheri (East).

The cash-strapped carrier has been struggling for survival for nearly a year and has been defaulting on payments against lease rentals, oil purchases, landing and parking fee and even service tax and TDS.

The airline has a debt burden of over Rs7,000 crore and accumulated losses of Rs6,400 crore. It also owes around Rs280 crore towards the Airports Authority of India and Rs518 crore to Hindustan Petroleum in fuel dues.

In the absence of any succor from lenders, the airline has reduced its operations to one-third from 400 flights a day with just 20 aircrafts.

Income and service tax authorities had many a time frozen its bank account for defaulting on tax payments.

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