Government requests SC Bench to avoid interpreting PSC

The government today requested the Supreme Court Bench adjudicating the gas dispute between Reliance Industries Ltd (RIL) and Reliance Natural Resources Ltd (RNRL) to avoid making any interpretation of the production sharing contract (PSC).

“The PSC may be preserved. Please avoid any interpretation of the PSC as it will have an adverse impact on the other contracts (entered by the government),” Gopal Subramanium, the country’s solicitor general told the the three-judge Supreme Court Bench headed by chief justice K G Balakrishnan. Subramanium is representing the government, which is a party to the RIL-RNRL case.

RIL and RNRL have moved to the Apex court challenging the decision of Bombay High Court delivered on June 15, which had asked RIL to provide 28 million standard cubic metre per day (mscmd) of gas to RNRL (from its KG D6 block) at a price of $2.34 per million British thermal unit (mBtu) for its proposed power plant at Dadri. RIL, however, contended that it could not do so in view of the government’s gas utilisation policy. It also said that it could not sell at a price lower than the government-approved price of $4.2 per unit.

“The government is the owner (of all natural resources) and the contractor (RIL) is subject to control and direction of the government,” said. He also said that the situation between RIL-RNRL and RIL-NTPC cannot be equated since the former is a private agreement while the NTPC’s claim to 12 mscmd gas arises from an international competitive bidding.Earlier in the day, RNRL told the Court that gas from KG D6 could be used by the Anil Dhirubhai Ambani Group for any of its units and its use was not limited to Dadri alone. Quoting from various documents, including the Bombay High Court’s ruling on the issue, Mukul Rohatgi, the RNRL counsel sought to reiterate that RIL could make losses by selling the gas at $2.34 per unit. “Their claim of incurring a loss by selling gas at $2.34 is incorrect,” he said, and also quoted from RIL’s own chart that showed a net cash flow of $6 billion, even by selling gas at $2.34 per unit.