A man walks past a Reliance Industries Limited sign board installed on a road divider in the western Indian city of Gandhinagar January 17, 2014.

Mumbai - Shares in India's Reliance Industries jumped by more than five percent Monday after it demanded the government double gas prices - a move that could significantly boost the energy giant's profits.

Reliance, along with partners BP and Niko Resources, sent an arbitration notice to the government late last week, asking it to hike prices to $8.40 per million British thermal units (Btu) from the $4.20 currently paid by gas companies.

Reliance's shares surged to 1,048 rupees before trimming gains to trade at 1,027.00 rupees in the afternoon.

Analysts said investors were buying Reliance's shares more on “hope” than anything tangible.

Reliance, British energy giant BP and Canada's Niko jointly own D6, India's only operational deep-water field, off the coast of eastern Andhra Pradesh state.

“This is most likely hope buying,” said Vikram Dhawan, head of Mumbai-based brokerage firm Equentis Capital.

“Even though the final settlement of pricing may take a longer time, from the shareholders' perspective, arbitration is a step in the right direction.”

Last year, India's government approved the linking local gas prices to global benchmarks as of April 1.

The move would effectively double gas prices in the fuel-hungry country where energy demand outstrips supply.

But the Election Commission in March asked the Congress-led government - expected to lose office in elections currently under way - to postpone the increase until after poll results are announced this Friday.

BP holds 30 percent of D6 while Niko has a 10-percent stake in the gas block.

Analysts say higher prices are necessary due to the large costs of gas extraction.

The block's output has tumbled, which Reliance blames on difficulties of extracting gas.

The government insists the firms have not made sufficient effort to extract the gas.

Analysts say Reliance and its partners may have resorted to arbitration because the expected change in government may add to delays and consequent revenue losses.

Reliance said last week that the government's delay in implementing the price rise left the company and its partners “with no other option” but to pursue arbitration. - Sapa-AFP