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#Freeze: BP, Reliance protest EC suspension of gas price hike

The operators of India’s biggest natural gas field have filed an arbitration notice after the Indian government suspended a plan by the companies to double their prices.

Mukesh Ambani-owned Reliance Industries, British Petroleum and Canada’s Niko Gas, who jointly operate the KG-D6 field in Andra Pradesh, say the suspension is impacting on their plans to further develop the field.

The suspension was implemented by India’s Election Commission which said any increases would impact on voter sentiment during the country’s general election.

In a joint statement issued this weekend, the companies said they were unable to approve investments of more than $4 billion without permission to increase gas prices.

The Indian government sets domestic gas prices and had approved a price of $4.2 per million metric British Thermal Units (BTU) of gas from the field for the first five years of production beginning 2009.

The new pricing of more than $8 was hotly debated and was finally approved last year only for the Election Commission to suspend the implementation of the price.

Some experts say the arbitration notice by the companies is an attempt to win favour Narendra Modi, who is widely expected to be named India’s next Prime Minister on 16 May.

The pro-business Mr Modi is certain to push through the new pricing without delay as soon as he becomes PM.

The arbitration notice is the second in as many weeks involving a British firm after Vodafone filed a similar notice in relation to a $2.6 billion tax dispute with the Indian government.

BP, which paid some $7.2 billion for its 30% in the KG-D6 gas field, and Vodafone are the largest foreign investors in India.

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