Supreme Court rejects ONGC plea against HC order

Supreme Court rejects ONGC plea against HC order

Stay order on tender, e-auction

The Supreme Court on Tuesday rejected state-run ONGC’s plea against the Delhi High Court’s order that put on hold its notice inviting tender (NIT) and the consequent e-auction with regard to sale of 2.0 MMSCMD of natural gas from its block in the Krishna-Godavari (KG) basin in Kakinada, Andhra Pradesh.

A Bench led by Justice Vineet Saran dismissed as withdrawn the PSU’s plea seeking to vacate the HC order, but allowed it to approach the HC for expeditious disposal.

When Solicitor General Tushar Mehta told the Bench that there was urgency in the case, the judges said: “There is hardly any urgency Mr Mehta. Had there been any urgency, the Union would have filed its counter between May 3 to 19… Good that you have withdrawn the case, otherwise we had thought of imposing heavy cost on you (Union of India).”

Stating that the HC had “erroneously granted stay of auction without considering the government’s submissions,” ONGC argued that the HC order proceeded on the factually incorrect premise given by the two GMR group companies – GMR Vemagiri Power Generation Ltd and GMR Rajamundhry Energy – that while the notification was issued on March 21, 2016, no offers were invited by the government until April 4, 2021 i.e. for nearly 60 months.

Terming the GMR’s stand as “factually inaccurate,” the SG said that in terms of the March 2016 notification, ONGC itself had conducted five auctions for the sale of natural gas and allotted gas to various buyers. “In fact, the auction under stay is the third such auction from the same Deepwater field i.e. KG-DWN-98/2 Block, EOA Kakinada (Andhra Pradesh) and other similarly placed parties have also auctioned gas,” the ONGC said in its appeal.

ONGC said that the HC order by staying the e-auction will abort its efforts to monetise gas production. “Competitive auction of natural gas is taking place from other fields and potential buyers might move to other producers under different PSCs. If that happens, the petitioner will irreparably lose the gas market,” the appeal stated.

The PSU further said that it has an independent, unfettered right to sell natural gas arising from its PSC with the Government of India. Besides, it is bound by the policy decisions of the ministry of petroleum and natural gas (MoPNG), including the March 2016 notification (which provides marketing and pricing freedom for such fields) including the Natural Gas policy reforms notified vide MoPNG circulars of October 15 and December 3, 2020, according to which natural gas from these fields are to be auctioned at commercial rates discovered through a transparent and competitive bid process and has to be conducted through a directorate general of hydrocarbons (DGH)-empanelled agency, the appeal stated.

The high court last week had stayed the “operation, implementation, execution and finalisation of the NIT dated April 12, 2021 as well as corrigendum to the NIT issued on April 27, 2021 and the consequent e-auction,” till June 4, the next date of hearing. The HC said that prima facie case was made out in favour of the two GMR group companies and the finalisation of the bidding would cause irreparable loss to them.

The GMR group firms had challenged the NIT and March 21, 2016 notification of the petroleum ministry which provides for forward auction, ie. gas would be allocated to the highest bidder.

While stating that this would be discriminatory too, they further contended that power sector is under stress and the result of the e-auction would be that the natural gas will be supplied to the other sectors at a higher price, even as the two firms had made substantial investments `1,000 crore on the assurance given by the ONGC.

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