RIL may ask SC for presiding arbitrator in KG-D6 case

Mukesh Ambani’s Reliance Industries Ltd plans to knock on the Supreme Court’s doors for someone to chair a panel of arbitrators to look into the company’s claimed right to recover its investment from the D6 block in the Krishna-Godavari basin (KG-D6) from gas sales.

There has been no headway in the joint arbitration process since 2012, following the government and RIL nominating an arbitrator each. However, the two — V N Khare and S P Bharucha — were unable to reach a consensus on a third arbitrator.

In April 2012, the company had moved the SC in a similar way, seeking appointment of a government arbitrator, after appointing Bharucha from its side. Both parties had opted for arbitration, following the government’s disagreement on settling the dispute on cost recovery. The ministry was raising objections in the company’s plans to recover cost of Rs 6,000 crore for developing the block.  

According to the ministry, the major reason for it blocking the proposal was the drop in production from KG-D6. This has dropped to around 15 million standard cubic metres a day (mscmd), compared to a target of 80 mscmd. The government’s resistance came to the forefront when production dropped from a 2010-11 high of 61 mscmd to 33 mscmd in 2011-12. Currently, around 25 power plants are running short of gas due to the decline in KG-D6 production. While allocation to the power sector from KG-D6 was around 29 mscmd, this has been completely stopped now, based on a higher priority for supply to the fertiliser sector. The latter is getting 14.4 mscmd now.

An empowered group of ministers on the issue, led by defence minister A K Antony, is set to meet on July 22. The EGoM had decided not to cut the priority ranking for fertilisers; a decision on allocation to the power sector is to be taken in the meeting.