Apex court order to prevail over poll panel freeze on gas price rise

The last word on gas pricing has not been spoken. The Supreme Court's verdict on a public-interest litigation (PIL) challenging higher gas price to Reliance Industries (RIL) might come before April 1 and the order will prevail over the Election Commission's directive.

Besides, in a relief to RIL customers who face the prospect of gas sales purchase agreements (GSPAs) expiring, the government is likely to ask them to either continue with the existing GSPAs or sign up fresh ones pending settlement of price issue later.

Importantly, RIL might not get to charge the customers prices based on the gross calorific value and continue with the current practice of net present value (NPV)-based pricing. "The Ministry of Petroleum and Natural Gas has decided to directly intervene in the signing of GSPAs. Of some 10 matters that were sticking points between the fertiliser companies and RIL, a majority of them have been resolved," said an official.

Although the PIL deals with only RIL, the Election Commission's decision asking the government to defer the price revision has denied all gas producers an increase. Petroleum minister M Veerappa Moily said on Tuesday that the petroleum ministry was mulling legal options by approaching the solicitor general or attorney general of India to counter the Election Commission's directive. "Arguments for the RIL case are slated to wound up in the Supreme Court by Friday," said the official.

By referring the gas price issue to the Election Commission, the ministry opened a Pandora's box. Officials denied it was not done under any pressure from the Aam Aadmi Party. "It was a well thought-out decision by petroleum minister Moily to seek EC's permission," said a senior government official.

The petroleum and natural gas ministry will play the mediator's role in a joint meeting of all the stakeholders on March 28 and is likely to strike a deal by then. This comes after the Department of Fertilisers as well as the Fertiliser Association of India asked the oil ministry to set the house in order.

The current GSPAs would expire on March 31 and the fertiliser units were up in arms against the terms of reference in the new draft agreements. "Both the buyers and the sellers have already sorted out six out of the 10 contentions. There needs to be a fresh agreement in place by April 1 and it can also be extended, with the clause of adding the new price accordingly," said the official.

The meeting on March 28 will be attended by RIL, Reliance Gas Transportation Infrastructure, GAIL, fertiliser and power producers and representatives from the fertiliser ministry, too. There are GSPAs in place with 16 fertiliser units now, for a production of slightly over 13 million standard cubic metre a day from KG-D6, which was signed way back in 2009.

Softening its earlier stance, RIL on Monday stated the company would provide GSPAs for a long term of five years, if buyers desire so. As a step towards this, the firm has simplified its GSPA term sheet to the buyers on Monday. The proposed GSPA is aligned with the Rangarajan price formula, based on which the prices of domestic natural gas was supposed to increase from $4.2 a unit to $8.4 a million British thermal unit (mBtu).

Softening its stance, RIL said: "We believe that the GSPA Term Sheet is balanced and for buyers this is perhaps better than the terms offered by other domestic gas Sellers in the country,"

WHAT REVISED GSPAs SAY

* No take or pay obligation on buyers i.e. buyers to pay only for the quantity supplied by the seller

* Gas prices as notified by the government under the production sharing contract

* Sellers responsible for quality specs of gas

* In periods of constraints, gas to be supplied on pro-rate basis to all fertiliser buyers

* Key terms like invoicing and payments similar to GSPA signed in 2009