Seeking to nip in the bud the possible attempt by Reliance Industries Limited (RIL)) to take the legal route on its demand seeking the revision of gas price, the Petroleum and Natural Gas Ministry has cited a judgement by a Bench headed by former Chief Justice and another opinion by a former Supreme Court judge strongly backed the decision of the Petroleum Ministry to reject RILs demand for revision of gas price for the KG-DWN-98/3 block on the East coast of Andhra Pradesh.
A recent internal note circulated by the Petroleum Ministry, in reply to the demand by RIL for gas price revision, has cited the judgement delivered by the Supreme Court Bench comprising of former Chief Justice of India, K.G. Balakrishnan and sitting Supreme Court judge, Justice P. Sathasivam on May 7, 2010, in special leave petitions (SLP) filed by Union Government, RIL and RNRL. The judgement said, “Though the contractor (RIL) has the marketing freedom to sell the product from the contract areas to other consumers, this freedom is not absolute. The price at which the produce will be sold to consumers would be subject to the Government’s approval. The EGoM has already set the price of gas for the purpose of PSC. The parties must abide by this and other conditions placed by the Government policy.”
Justice (Retd.) B. Sudhershan Reddy had said, “The EGoM decisions regarding the utilisation of the natural gas and the price formula/basis etc do not suffer from any legal or constitutional infirmities. They shall apply to all supplies of natural gas under the PSC. The parties are bound by the governmental policy and approvals regarding price, quantity and tenure for supply of gas. Thus, it emerges that RIL is bound by the decisions of the EGOM on price, quantity and tenure of supply of natural gas and supplies of natural gas can only be made in accordance with the policies of the Government. In view of above, any revised price proposal will be examined by the Government after expiry of 5 years from commencement of supply and the contractor is directed to comply with the government decisions.’’
The Petroleum Ministry has already rejected the demand by RIL for gas price revision for the KG-DWN-98/3 block on the East coast of Andhra Pradesh on the grounds that it (RIL) had agreed for revision of price after five years. However, RIL has been insisting through its various communications, citing PSC provisions, that it had the right to demand revision of gas price and has been writing time and again to the Petroleum Ministry.
"We have sent a reply to RIL citing the judgment of the Supreme Court and that puts a cap on any attempts to explore the legal option. From our side, we have settled the issue now and revision of gas price will happen only after expiring of five year period," a senior Petroleum Ministry official said.
Responding to the issue of RIL observation regarding selling gas at higher prices, the letter states that the EGoM while approving the price formula/basis, had decided that the supply to all consumers would be made at the approved price and further that in the case of RIL vs. RNRL, the courts – Bombay High Court and Supreme Court acknowledged the position of the government that contractor is required to sell the gas to all its customers at a price/formula approved by the government and that he can neither sell at a lower price or at a higher price.