(Adds details on gas basin, arbitration, comment from oilministry)
By Nivedita Bhattacharjee
MUMBAI, May 10 (Reuters) - India's Reliance Industries Ltd and its partners in a gas block, BP Plc andNiko Resources, said on Saturday they were taking theIndian government to arbitration seeking implementation ofhigher gas prices.
The government in June last year approved a formula, linkingprices of locally produced gas with global benchmarks, thatcould have nearly doubled gas prices from the current $4.20 permmBtu from April 1.
The Indian Election Commission, however, in March asked NewDelhi to defer an increase until the completion of the five-weekgeneral election, results of which will be declared on May 16.
Reliance's five-year gas sale pacts with sectors includingfertiliser makers and power expired on March 31, requiringbuyers to sign new contracts for supplies from its D6 block inthe Krishna Godavari basin off India's east coast.
Reliance, India's second most valuable company controlled byits richest man Mukesh Ambani, and its partners issued thenotice of arbitration to the government on May 9, the threecompanies said in a joint statement.
"The continuing delay on part of the Government of India innotifying the price in accordance with the approved formula forthe Gas to be sold has left the Parties with no other option butto pursue this course of action," the statement said.
BP has a 30-percent stake and Canada's Niko owns 10 percentin the gas block.
A spokesman for India's oil ministry could not immediatelycomment on the development.
Gas output from the D6 block has fallen sharply since 2010.Reliance says the decline is due to the geological complexity ofthe block, while the government believes contractors have failedto drill the promised number of wells.
Reliance, which operates the world's biggest refiningcomplex in western India, and its partners said without anyclarity on gas prices they were unable to sanction plannedinvestments of close to $4 billion this year.
Overall, the companies said, they were planning to invest $8billion to $10 billion in the next few years to "significantlyincrease production" from the D6 block.
"In addition, this will also delay the ability of theParties to appraise and develop other significant discoveriesmade last year," the companies said.
The Election Commission in March gave no reason for its moveto ask the government to delay the price hike, but it can orderany new decision to be put on hold if it's seen influencingvoters or benefitting any particular political party.
Also, two petitions have been filed in the Supreme Court tostrike down the gas price increase decision on grounds that itfavoured a corporate house and was against the interests of thenation. The hearing in the case is continuing.
Demand for gas in India far outstrips consumption anddomestic supply, but the government has kept prices below globalmarket levels for producers of fertilizer and electricity, whichhas deterred investment in domestic exploration and production. (Additional reporting by Devidutta Tripathy and Nidhi Verma inNew Delhi; Editing by Sumeet Chatterjee, Andrew Heavens and TobyChopra)
BP (BP.)