RNRL refutes govt's stand on gas price

Anil Ambani-promoted Reliance Natural Resources (RNRL) has filed an affidavit in the Bombay High Court in the case involving Reliance Industries (RIL), refuting the petroleum ministry's stand that the government-approved price of $4.2/million metric British thermal unit (mmBtu) is the selling price of gas.

The affidavit, filed on December 4, also stated that according to the Directorate General of Hydrocarbons (DGH), the selling price for gas can be lower than the valuation price.

According to the Gas Sale Master Agreement between RIL and RNRL, the Anil Ambani-owned company is entitled to get 28 million cubic metres of gas per day from the Krishna-Godavari (KG) basin at a price of $2.34 per million British thermal unit (mBtu) for a period of 17 years. RIL had refused to supply gas at that price for that period. According to RIL, it is ready to supply the gas to RNRL at the government-approved price of $4.20 per mBtu.

In its fresh affidavit, the Anil Ambani group company said, “RNRL has relied on the ministry's own documents showing that the stand is contrary to the provisions of the Production Sharing Contract (PSC)." It added that under clause 21.6 of the PSC, the government is only required to approve the formula for determination of the gas price and not determine or fix the sale price.

RNRL has also averred that the ministry had concealed the most important fact from the court earlier that the price formula approved by the government on September 12, 2007 has no impact on the agreement or commitment to supply gas by RIL to RNRL at $2.34/mmbtu as the decision was "without prejudice the RNRL vs RIL and NTPC vs RIL court cases" as stated in government’s press note of September 12, 2008.

Last week, the ministry decided to allot gas to the Dabhol power plant, operated by Ratnagiri Gas and Power, from the KG basin owned by Mukesh Ambani's RIL on a priority basis to help ease electricity shortage in Maharashtra. The government will have to buy gas from RIL at $4.20 per mbtu for Dabhol.

The ministry had also said that the supply of natural gas from RIL's KG basin D-6 field would be made at a selling price of $4.2/mmBtu for all customers across all sectors, as decided in the Empowered Group of Ministers' (EGoM) meeting held in September 2007.

The decision came at a time when NTPC was fighting a case against RIL for buying gas for two of its plants — Kawas and Gandahar in Gujarat — at a price of $2.34 per mBtu.

The government in an affidavit filed in the RIL-RNRL case on November 14 had stated that sale at a price less than $4.20 per mmbtu is not envisaged by the EGoM in accordance with provisions of the PSC.

The Bombay High Court had asked the government counsel to file an affidavit making a categorical statement on the pricing of the gas — which is the most contentious issue in the case — and explain why the pricing is binding on all. The next hearing of the case is scheduled on December 11.