By IANS,
New Delhi: Reliance Natural Resources Ltd (RNRL) Tuesday told the Supreme Court it was not bound by the decisions of the ministerial panel on Krishna Godavari gas and that Reliance Industries Ltd (RIL) had itself sought the oil ministry’s nod to sell the hydrocarbon at $2.34 per unit.
Quoting from various documents, including RIL’s communication to the oil ministry, RNRL counsel Mukul Rohatgi told the apex court that $2.34 per unit was also sought as the base price for gas sales to all consumers, including his client.
“RIL and RNRL signed a gas supply master agreement on Jan 12, 2006 under which RNRL can purchase up to 28 million units of gas per day for power generation,” Rohatgi said, quoting from RIL’s letter of April 14, 2006 to the oil ministry.
“Gas supplied under the gas sale and purchase agreement is for power generation. The contract price is the same as the price bid by RIL in an international competitive bidding process for supply of gas to NTPC,” he said, quoting the letter.
“Under the relevant provisions of the production-sharing contract, we request your approval of the above price as the commodity price, as the price of gas,” Rohatgi further added from the letter.
“Once the valuation is done as per the production-sharing contract, RIL can sell the gas at $2.34 to RNRL,” he told the three-member bench of Chief Justice K.G. Balakrishnan, Justice B. Sudershan Reddy and Justice P. Sathasivam.
Rohatgi also filed a four-page affidavit, and quoting from it he said that RNRL had every right to get the Krishna-Godavari gas for the price, quantity and the tenure as mutually agreed with RIL.
“RNRL has unqualified rights to get 28 million units of gas per day for 17 years at the price of $2.34 per unit,” he said, adding it must be delivered at $3.18 per unit, including the transportation cost and the marketing margin.
Quoting from an answer by the oil ministry in parliament, Rohatgi also sought to impress upon the court that even the government was conscious of the fact that the sale of gas by RIL was under a new exploration and licensing regime.
Under this regime, the contractor has full marketing freedom on the sale of gas, unlike the administered price mechanism regime, where everything — including the price and the intended consumer — had to be approved by the government.
For the eighth week now, the apex court has been hearing the dispute over the supply of 28 million units of gas for 17 years at $2.34 per unit to Anil Ambani-led RNRL from the gas fields off the Andhra Pradesh coast, awarded to Mukesh Ambani-led RIL.
The price, tenure and quantity were based on a 2005 family pact, but RIL subsequently said it could only sell the gas for $4.20 per unit, as this was the price, the company claimed, fixed by the government.
During the brief hearing in the post-lunch session Tuesday, the RNRL counsel said the decisions of the empowered group of ministers (E-GoM) were taken much before the actual contract was signed between his client and RIL.
“E-GoM decisions are prospective in nature. In any event, such decisions cannot, in law, be retrospective. These decisions are stated to be ‘without prejudice’ to the present dispute — therefore, on their terms, do not apply to the present case,” said Rohatgi.
“Any other interpretation would also threaten the validity of the NTPC contract,” he pointed out. “While making the bid for NTPC, RIL had effectively eliminated other bidders in an international competitive bidding.”
The decisions by the empowered ministerial group will only bind other consumers of gas from RIL with whom the company may have entered into deals after the these decisions on pricing and quantity of supplies, the RNRL counsel explained.
At one point, the bench asked why the family pact had not detailed the various issues related to gas supplies, to which Rohatgi read out that part of the family memorandum of understanding which refers to various related aspects.
He also told the court that the family pact was, indeed, the basis of the de-merger scheme of RIL and that the company’s unilateral gas supply master agreement clearly mentions the price of $2.34 per unit.