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An innocuous fault line in the Rangarajan formula for pricing gas from domestic fields could end up giving windfall gains to producers, including Reliance Industries, which is already in the eye of a political storm over the proposed price increase from April 1.

The Mukesh Ambani-led company has already moved to take advantage by changing the terms of its fresh supply contracts with fertiliser plants that would entail them paying 10 Percent over and above the new price. The entire gas from RIL's field is supplied to urea plants and its existing contracts expire on March 31.

The fly in the ointment is the way calorific, or heating, value of gas is calculated and the Rangarajan formula's silence on this aspect. The formula itself is based on average prices in global gas trading hubs. All these markets price gas at the fuel's gross calorific value (GCV), which is higher than the net calorific value (NCV), as impurities such as water or other gaseous content add to the volume.

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