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After Reliance Industries demanded interest on KG-D6 gas payments flowing into gas pool account operated by GAIL, the state-owned firm has agreed to invest the receivables in short-term interest bearing deposits with public sector banks.
GAIL has written to Oil Ministry saying it will invest monthly accruals in the gas pool account in 271-day deposits of four empanelled banks - State Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Corporation Bank.
The government had in November hiked domestic natural gas prices by 33 per cent to $5.61 per million British thermal unit. In case of RIL's main gas field in KG-D6 block, it, however, ordered buyers to pay the firm old rate of $4.2 and deposit the balance $1.41 in the gas pool account.
The incremental $1.41 would become due to RIL if it can legally prove that Dhirubhai-1 and 3 gas output dropping to a tenth of projected 80 million cubic meters per day was due to geological reasons and not because of hoarding.
RIL has written to the Oil Ministry saying it is entitled to get the principal amount together with market interest rate in case it wins the case.
GAIL Director (Finance) P K Jain wrote to the Ministry saying the amount received has been credited to gas pool account and after paying royalty on monthly basis, it will be invested in short-term deposits.
"The investment is made by calling the interest card rates from the banks empanelled with Oil Industry Development Board (OIDB) i.E. SBI, IOB, OBC and Corporation Bank," he said.
As interest rate on 271 days to 1 year deposits is higher, the accruals in the gas pool account are invested in such term deposits.
"When the short term deposits mature, these will be re-invested -- both principal and interest -- by the same procedure," he wrote.
Sources said RIL and its partners are paying the government statutory levy of royalty at the rate of 5 per cent on the USD 4.2 gas price they got and GAIL pays the same from the gas pool account on the remainder payments of USD 1.41.
Invoices raised ask KG-D6 gas users to deposit USD 4.2 with KG-D6 partners -- RIL, BP and Niko in 60:30:10 proportion of their shareholding and the $1.41 rest into GAIL-operated gas pool account.
Originally, RIL suggested it should be allowed to collect the new rate of USD 5.61 and promised to pay royalty on the full amount and deposit the $1.41 in the gas pool account within three working days.
The Ministry, however, went by two-part payment system which is fraught with risks like payment defaults.
