SC moved to stay decision doubling gas prices

indexNGO Common Cause Friday moved the Supreme Court seeking a stay on the government decision doubling the price of gas produced from Reliance Industries Limited-operated KG D-6 field that would become effective April 1.


It said the decision, doubling the gas price from $4.2 to $8.4 per MMBTU, was “arbitrary, malafide, unreasonable, and based on extraneous considerations” that would give windfall gains to Reliance Industries Ltd.

Seeking the stay of the decision, Common Cause’s petition said at least the decision to increase the gas prices should not be made effective for the gas produced from Reliance Industries Limited operated KG D-6 field during the pendency of its petition challenging the government decision to double the prices.

Common Cause had last year moved the apex court seeking the quashing of the decision to increase the gas prices effective from April 2014 and the cancellation of the Production Sharing Contract between the government and the RIL. Its plea along with that of a communist law maker Gurudas Dasgupta is pending hearing.

Common Cause and other eminent people by their 2013 plea have also sought a probe “into the high level collusion between RIL and the political establishment and the corruption involved, including on the aspects of not taking any action against RIL for hoarding the gas….”

The application moved Friday said: “Even if the government were right in assuming that the new price would bring in more investment in exploration, there is absolutely no justification for raising the price of gas from the existing fields. The nation can always pay a higher price for more difficult horizons, provided the duly approved and audited cost of exploration and production warrants the same.”

In the present case, the application said that the current production was realised with no prospect of getting a price of $8.4 per million British thermal unit.

The NGO also noted that the Production Sharing Contract (PSC) does not permit a revision in the price of natural gas once the field has been declared “commercial”, and this field was declared “commercial” at $4.2 per MMBTU.

The government, the NGO argued, was giving “a windfall to the current contractor, RIL, at the cost of the people. To add to this jeopardy, the government has now allowed RIL to charge the new price for gas that it had already undertaken to produce. Thus RIL would be benefitting from its non-performance and a deliberate drop in production”.

The application by Common Cause said that following the doubling of the gas price to $8.4/mmbtu, the well-head price for dry natural gas in India has become the highest in the world.

The application further said that there was no explanation as to why the gas price was fixed in US dollars when the entire production is consumed domestically.

Describing the decision to double the gas price as “arbitrary, mala fide, unreasonable, and based on extraneous considerations”, the NGO said that the stay of the same is called for since “valid and serious concerns of the ministries of finance, power and fertilizers have not been taken into account”.

(Source: IANS)

Court notice to centre; Reliance on gas price

The Supreme Court on Monday issued notice to the Centre, Petroleum Minister M. Veerappa Moily and Reliance Industries Limited (RIL) on a public interest litigation petition challenging the government’s decision to double the price to $8.4 per million British thermal unit (mmBtu) for gas produced from the KG basin.

A Bench of Chief Justice P. Sathasivam and Justices Ranjana Desai and Ranjan Gogoi also issued notice to the Petroleum Ministry, NIKO Resources Ltd and BP Exploration (Alpha) Limited on the plea filed by CPI leader Gurudas Dasgupta and the former Power Secretary, E.A.S. Sarma.

Senior counsel Colin Gonsalves, appearing for the petitioners, said the decision to raise gas price should be reviewed as the Minister had overruled the opinion of senior officers of his ministry and his predecessor. When Justice Sathasivam wanted to know “why the parties can’t go for arbitration,” counsel pointed out that the Minister had given a statement that he wanted to junk arbitration and that the government would not proceed with the process.

Counsel alleged that the Minister “bats for Reliance” and had overruled the decision of the Director-General of Hydro Carbons to impose a fine on it.

Senior counsel Harish Salve, appearing for Reliance Industries, however, said, “We want arbitration to go on. We will file an application for appointment of the third arbitrator.”

Justice Sathasivam told counsel “It [PIL petition] requires examination. When a Member of Parliament comes and makes an assertion it cannot be decided at the admission stage. We are not expressing any opinion at this stage.”

“Illegal, mala fide’

The petitioners said the government had acted illegally, unreasonably, irrationally and with mala fide in granting excessive benefits to the respondents, thereby virtually bankrupting the exchequer and adversely affecting the Indian economy as a whole. The contractors allegedly incurred investment costs for the full capacity of 80 MMSCMD and recovered all these costs and perhaps more from the government through the sale of gas priced at $4.2 per mmbtu. Simultaneously, the contractors deliberately reduced production, thus holding the country to ransom at a time when gas demand far outstripped supply. By June 2013, only 9 out of 18 wells were in production and gas sales were only 18% of the target of 80 MMSCMD. The reduction was done in anticipation of a price rise and this was confirmed by government’s announcement that from April 2014 the price would be increased to $8.4 mmbtu.

“RIL, which had gone in for arbitration, had already recovered this amount from the sale of natural gas. They appointed Justice S.P. Bharucha as their arbitrator. The government appointed Justice V.N. Khare as its arbitrator. Both judges met and were in the process of appointing the third arbitrator in October 2012 but could not do so.” RIL would be sitting pretty if the arbitration was not proceeded with. “It is the government which stands to lose up to $ 2.4 billion by the end of the current year, by not proceeding with the arbitration. The Petroleum Ministry is deliberately not proceeding with arbitration to allow RIL to get away without paying penalties for the shortfall in production.”

The petitioners sought a direction to RIL and NIKO to forthwith relinquish those areas of the KG basin as recommended by CAG; to appoint a third arbitrator (umpire) and to proceed with arbitration expeditiously and complete it within six months; to fix the price of domestically produced gas in rupees, and not in dollars or any other currency, and to stay the doubling of the gas price.

(Source: IANS)