Reliance Industries Ltd. (RIL) could not go along with the memorandum of understanding on supply of gas to Reliance Natural Resources Ltd. (RNRL) at a price that was far lower than that fixed by the government under its National Gas Utilisation Policy, senior counsel Harish Salve argued in the Supreme Court on Wednesday. By breaching the Production Sharing Contract (PSC) with the government and by supplying gas at a lower price to RNRL he (RIL) would run the risk of cancellation of the PSC.

Mr. Salve made this submission before a Bench of Chief Justice K.G. Balakrishnan and Justices R.V. Raveendran and P. Sathasivam, hearing the dispute between RIL and RNRL over gas supply.

Different from farming

When Mr. Justice Raveendran told Mr. Salve that he sounded as if RIL was purchasing the gas from the government, counsel said the PSC for gas exploration was different from farming activities where farmers owned land and the crop they harvested. Even after the PSC, the gas remained a national asset and over a period 85 per cent of the profit went to government coffers and 15 per cent to the exploring and refining companies.

At this, Mr. Justice Raveendran wanted to know whether RIL or RNRL ever challenged the National Gas Utilisation Policy. Mr. Salve said none questioned it.

When the judge asked whether RIL would make a profit from selling gas at a price it committed itself to NTPC, although it was substantially lower than the government-approved price, Mr. Salve did not give a categorical reply. He, however, said: “If RNRL is asking me [RIL] to give gas at a lower price, then the government will be debiting my account and I am recovering a lesser amount. I have no control on gas, price and choice of customers.”

Not maintainable

He argued that RNRL’s suit against the demerger in the Bombay High Court was not maintainable as it was a third party and neither RIL’s shareholder nor creditor at the time of its filing. Arguments will continue on Thursday.

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