RIL challenges govt’s new gas pricing norms
Reliance Industries Ltd (RIL) told the Supreme Court (SC) that it had initiated arbitration proceedings against the government over the new domestic gas pricing guidelines. Senior lawyer Harish Salve, appearing for RIL, said the company had already appointed its arbitrator and it was now up to the government to respond. According to the new gas pricing formula announced in October by the National Democratic Alliance (NDA) government, the price of domestic gas was raised to $5.61 per million British thermal units (mmBtu) from $4.2 per mmBtu. It was much less than the $8.4 per mmBtu proposed by the United Progressive Alliance government, which was ousted in the 2014 general election. Salve’s statement came during a hearing on a petition filed by Communist Party of India leader Gurudas Dasgupta, who had alleged that the UPA government’s move to hike the price of gas was aimed at favouring RIL. Non-profit Common Cause also challenged the price hike. A third petitioner in the case is lawyer Manohar Lal Sharma, who has challenged the constitutional validity of the production sharing contract initially entered into between the government and RIL. Clarifying that the government had chosen not to accept the recommendations of the Rangarajan committee on which the UPA had announced the $8.4 per mmBtu price, solicitor general (SG) Ranjit Kumar said the new government’s decision was not to benefit any particular company, but for the benefit of the country and people in general. Dispelling expectations of companies that the guidelines could be implemented with retrospective effect, the centre told the court that the guidelines only came into force from 1 November.
Lawyer Prashant Bhushan, appearing for Common Cause, told a bench of justices T.S. Thakur, J. Chelameswar and Kurian Joseph that the government should take back the gas fields from RIL as it indulged in “gold-plating and over-invoicing of expenditure, and also over-estimation of reserves”. The dispute is over the gas from the KG basin which the government should reclaim from RIL for not utilizing it, according to Dasgupta’s petition. The case will come up for hearing on 16 January. In May, RIL and its partners in the D6 block of the KG basin slapped an arbitration notice on the Government of India for failing to implement the Domestic Natural Gas Pricing Guideline, 2014, which was notified by the UPA government in January this year. This was one of the two arbitrations that RIL is currently involved in with the government of India. The second arbitration, which was initiated by RIL in July 2012, was on not allowing recovery of cost incurred in the development of D1 and D3 fields—the two flagship fields in the KG-D6 block. On 14 July, Dharmendra Pradhan, the minister of petroleum and natural gas, in a written reply to a question, informed the Lok Sabha that the ministry had disallowed the recovery of $579 million to RIL and its partners BP Plc. and Niko Resources Ltd in the D6 block on account of low production in 2013-14.
This was the fourth year when the government disallowed the company from recovering cost incurred in exploration and production of oil and gas from the KG basin due to a shortfall in production. Earlier the government had disallowed a cost of $457 million for fiscal 2011, $548 million for fiscal 2012 and $792 million for fiscal 2013, taking the total disallowed cost to $1.8 billion, including fiscal 2014.