The Central Government would not suffer any loss “if it values the gas at $4.2 mBtu (million British thermal unit) and Reliance Industries Ltd (RIL) sells it to Reliance Natural Resources Ltd (RNRL) at $2.34 mBtu,” argued RNRL’s senior counsel Mukul Rohatgi in the Supreme Court on Tuesday.
Making his submissions before a three-judge Bench of Chief Justice K. G. Balakrishnan, Justice B. Sudershan Reddy and Justice P. Sathasivam, the counsel maintained that RIL would continue to make profits of over Rs.30,000 crore.
He said “cheaper gas would enable the Anil Ambani group to produce competitively-priced power to the benefit of the consumers.” Assailing RIL’s stand for stating that gas would be sold at $2.34 only if the government approved the price, Mr. Rohatgi said “RIL wants to sell the gas at $4.2 to purely increase its profits to an astounding sum of Rs.75,000 crore at no additional benefit to Government at all.”
He contended that the supply of gas at $2.34 for 17 years would not cause any loss either to the government or to the Mukesh Ambani group.
He said “RIL is seeking to impose a unilateral term requiring government approval of price citing the terms of the PSC (production sharing contract). RNRL has an unqualified right to get 28 mscmd (million standard cubic metres a day) for 17 years at the price of $2.34 (that is, the delivered price of a total of $3.18 per mBtu including transportation and marketing margin as per the gas sales and purchase agreement (GSPA)).
When Justice Reddy wanted to know whether the Supreme Court’s decision would have any national implication, Mr. Rohatgi said the “ruling is only for RIL-RNRL case, not for other production sharing contracts, since EGoM (Empowered group of Ministers) decisions are taken ‘without prejudice’. EGoM decisions were not intended to override the court’s power.”
When Justice Reddy wanted to know why the family MoU had not been detailed in the demerger scheme, the counsel said “MoU is the basis of the scheme and RIL’s unilateral GSMA (gas supply master agreement) mentions price of $2.34 and quantity of 28 mscmd.”
He asserted that the Government did not have any right or role to restrict the supply and/or approve the same. The Government has full authority under the PSC to determine valuation thereof.
Production sharing contract
He said once the valuation was done as per PSC, RIL could sell the gas at $2.34 to RNRL as “RIL recovers its entire cost in the form of gas which entirely belongs to RIL and not to the government.”
Mr. Rohatgi said RIL had absolute marketing freedom to market the gas towards defraying of its cost and the Government had no role to fix the price at which RIL would sell this gas. He said “in the first few years 90 per cent of the total gas belongs to RIL and it is for defraying of cost.
Therefore the arrangement between RIL and the government is the production sharing contract and not the revenue sharing contract. Further the valuation of gas for PSC is between the government and RIL and RNRL is neither challenging the rights of the government to value nor the valuation price fixed by the government.”
He said “Once the government’s valuation is fixed at $ 4.2, it doesn’t lose anything even if RIL sells to RNRL at lower price. It is incomprehensible why the government is stating that RIL must sell to RNRL at $4.2, when it doesn’t get any additional revenue.” He will continue his arguments on Wednesday.
