The contractor must always be mindful of interest of India, says Parasaran

The Central Government both in terms of the Gas Utilisation Policy (GUP) and the production sharing contract (PSC) can regulate and distribute the manner of sale of natural gas through allotments and allocations to subserve the best interest of the country, argued Additional Solicitor General (ASG) Mohan Parasaran in the Supreme Court on Wednesday.

Continuing his submissions in the ‘Reliance gas dispute case’ before a three-Judge Bench of Chief Justice K. G. Balakrishnan, Justice B. Sudershan Reddy and Justice P. Sathasivam, the ASG said “the Government has the right to divide all the petroleum that is discovered and exploit it as per its policies from the continental shelf of India in public interest.” He pointed out that Clause 8.3 B of the PSC “states that the contractor must always be mindful of the interests of India. As per the production-sharing contract, the ownership of the gas cannot be passed on to RIL and it cannot sell gas as it pleases.”

He said “RIL is supposed to supply gas to customers at a uniform arm’s length price, fixed on the basis of the formula evolved by the government that takes global prices into account. In July 2006, the Oil Ministry had rejected RIL’s pact with RNRL for supply of gas at $2.34 per unit. While so Bombay High Court’s ruling in favour of RNRL overrides the government’s executive authority.”

He pointed out that the MoU was signed after the PSC, which was signed in 2000. He said the Government had the authority to approve the price formula and the contractor had also to gain prior approval from the Government before sale to the buyer or consumer. This price is benchmarked on the price of crude oil.


He said “The price has been caped at $4.20 if the price of crude oil goes to $60 and above. And it decreases to $2.34 in case the price of crude falls below $25. Thus the buyers are protected from price fluctuations and also benefit from a lower price regulated by the Government.

“As per Empowered Group of Ministers (EGoM) the price is fixed for five years and will be revised after every five years.” Senior counsel Ram Jethmalani, appearing for RNRL, intervened and said that the Government had been lying in Parliament in its answers to the questions and here it was saying something totally contrary.

Mr. Parasaran replied that the answers must be taken in the context of each question and bearing in mind that these questions and answers were done before the formulation of the GUP.

When senior counsel Rohatgi wanted to know whether Government approval was a must for sale of gas to NTPC and whether the Government would ask for approval, Mr. Parasaran said the government would take a decision after the Bombay High Court gave its verdict in the dispute.

Additional Solicitor General Vivek Tanka, who also appeared for the Centre, said that a suitable arrangement between the two brothers could not be a suitable arrangement for the Government and any suitable arrangement between the two brothers should be subject to Government approval. He argued that the MoU between the two brothers in a family could not be over the PSC. He explained with the help of charts how various sectors would lose to the extent Rs. 75,000 crore if the private arrangement between parties was given effect to and how public interest would suffer. Arguments will continue on Thursday.

Keywords: Gas rowAmbaniRILRNRLJethmalani

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