Who should earn gas price differential, RIL or RNRL, asks ADAG

Anil Ambani group firm RNRL has questioned the propriety of RIL in raising the issue of profits that it may earn out of the gas it gets from the Mukesh Ambani-run company.

"The profits that RNRL may make is not a concern of RIL. In fact, RNRL was created just so that it could earn such a profit. Otherwise there was no need to create such an entity," the Anil Ambani group firm said in its affidavit filed in Supreme Court on Tuesday.

The Supreme Court had last week issued notices to both RNRL and RIL, which had made government an intervener, on their cross petitions wherein the former amendment in the High Court order to make the gas supply by RIL binding.

RIL, on the other hand, had challenged the judgement that asked it to supply 28 mmscmd of gas at the rate of $2.34 per mmBtu, a price that is 44 per cent lower than the $4.2 fixed by the government.

"Further, assuming that RIL does not sell gas to RNRL at this price, it would presumably sell this gas to other parties at $4.2 per mmBtu and would pocket the difference between $2.34 and $4.2 for itself.

"The question then is whether it is RIL or RNRL which should earn this amount, and not whether the government is entitled to the same," it said. The Anil Ambani group firm said in view of the marketing freedom accorded to RIL under the Production Sharing Contract (PSC), there is no question of an administered price mechanism and "the possibility of RNRL receiving gas at a price lower than its competitor cannot be a ground for RIL refusing to honour its commitment."

It further said that government had merely set the valuation at $4.2 per mmBtu for a period of five years and regardless of this valuation, RIL is at liberty to sell gas to any party at any price as per the PSC.

RNRL contended that "the sale of gas is from RIL's share over which it has complete marketing freedom. RNRL is not concerned with any part of the government's share of gas", RNRL stated, adding the impugned Bombay High Court judgement had no fiscal impact on the government and protected its interests.

The High Court had held that government was free to put price on gas that might be different from the price at which RIL sells the same to RNRL, the Anil group firm submitted.

In its petition, RIL had said that High Court had without any justification distinguished between the contractors share of gas and the government's share of gas and indicated that the contractor need not sell its share of gas at the government approved price.