The ministry added that the deal did not meet the production sharing criteria laid down by the government.
In other words, the ministry does not agree with RIL's delivered gas price of $3.18 per million metric British thermal unit to RNRL, which is far lower than the prevailing market price of around $ 8-10 per mmbtu.
This price includes marketing and risk management charge of $ 0.12 per mmbtu and transportation cost of $0.72 per mmbtu, but does not include taxes and duties.
RIL was to supply gas up to 28 million standard cubic metres per day to RNRL. RIL sells gas from its Panna/ Mukta and Tapti fields at $4.75 per mmbtu to power companies.
This decision is likely to impact Reliance Energy's proposed 7480 MW Dadri power project, which is supposed to draw heavily on gas procured at a subsidised rate from RIL.
In response, R-ADAG said, "RIL's obligation to supply gas to NTPC and RNRL at the previously agreed prices have not been affected. In fact, the government approval is limited to the price to be adopted for determining the government share of profit petroleum. This is a matter between the government and RIL."
The RIL spokesperson did not offer any comments till late.
"It may be noted that the transaction between RIL and Reliance Natural Resources Ltd is a part of their de-merger agreement and therefore does not meet the production sharing criteria of 'arms length sales,'" the ministry release said.
The release also points out that the prevailing domestic gas prices command a significantly higher price than the proposal of RIL.
Reliance also requires no-objection from Niko Resources, its partner in developing the D-6 block of the Krishna-Godavari basin, from where the gas was proposed to be supplied to RNRL. Niko holds a 10 per cent stake in the block.
