Supreme Court seeks response from Centre, RIL on gas pricing

This, after PIL seeks rethink on govt's decision on gas pricing based on Rangarajan formula

The Supreme Court on Monday issued notices to the Centre and Reliance Industries (RIL) on a public interest litigation (PIL) against the increase in natural gas price, filed by Communist Party of India leader Gurudas Dasgupta and former Union power secretary E A S Sarma.

A bench headed by chief justice P Sathasivam asked the Centre and RIL to respond within four weeks. The next hearing is scheduled on September 6. The central government, petroleum minister M Veerappa Moily, the petroleum ministry, RIL, Niko Resources and BP are among the respondents in the PIL.

“The bench has asked us why Moily is included in the list. To which, we responded there are charges levelled against him which need to be addressed,” Dasgupta’s counsel Colin Gonsalves told Business Standard. The PIL prayed for a stay on the decision to increase the price of domestic natural gas from $4.2 per million British thermal unit (mBtu) to $8.4 a mBtu, applicable from April 2014.

The PIL has also sought the apex court’s intervention in the appointment of a presiding arbitrator for a panel looking into RIL’s right to recover its investment in the KG-D6 block from gas sales, thereby completing the process within six months.

Dasgupta had alleged that the petroleum ministry was sitting on a penalty of $1 billion imposed on RIL in FY12 and also failed to implement relinquishment of 86 per cent of the KG-D6 block area held by RIL.

The Rangarajan committee had proposed a pricing by taking an average of the prices in US, Europe and Japanese hubs and then averaging it out with the netback price of imported liquefied natural gas to give the sale price of domestically-produced gas.

Netback is the total cost of bringing crude oil to the marketplace and the revenues from all the products that are generated from it.

When Harish Salve, who appeared for RIL, notified that a Comptroller and Auditor General report cannot be the basis to maintain such a petition, the Bench indicated the petition cannot be ignored as Dasgupta is a senior Parliamentarian.

While those supporting the price hike claim the move would boost further investment in exploration, those against it say the move would raise the government’s subsidy outgo in sectors like fertiliser and power.