Government's consistent stand in parliament is that it doesn't have any role to play in fixing gas pricing, its role is limited to ensuring that it gets its shares of profit from oil and gas as part of the production sharing contract.
According to the Directorate General of Hydrocarbons, RIL's cost of producing gas is $1.28 per million unit. Oil ministry and RIL have connived to fix the gas at $4.20, while the NTPC and RNRL pricing was fixed at $2.34. This is the simple part. Now we come to the more complicated part. RIL has been regularly hiking its capex development plan with the DGH. Right now the figure is Rs 45,000 crore. There is a reason behind this.
Under the PSC, the contractor RIL first gets to recover all its capex field development and operating costs and only then begins to pay the government. That constitutes profit gas. By bloating the field development cost, RIL is ensuring that the government gets practically nothing, while its pockets the cream.
Ergo, if the capital expenditure plans go up, the government's profits fall. That is why RIL would not like CAG to audit its KG Basin capex plans because then the truth will be uncovered and the gigantic fraud perpetrated on the Indian people will come to light. Incidentally the four member 'management committee' which approved the capex plan consists of two RIL personnel and two oil ministry personnel. Cosy set up, no?
All this under the watchful gaze of the people of India. Making it a Rs 45,000 crore scam. The largest ever.