RIL-govt tussle on KG-D6 gas rate headed for the courts?

The tussle between the government and private sector biggie-Reliance Industries Ltd (RIL) over the pricing of KG-D6 gas may eventually land up in the courts with both sides refusing to budge from their respective positions, Anupama Airy reports. Natural Justice

The tussle between the government and private sector biggie-Reliance Industries Ltd (RIL) over the pricing of KG-D6 gas may eventually land up in the courts with both sides refusing to budge from their respective positions.

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The petroleum ministry has instructed the Directorate General of Hydrocarbons to "engage a senior counsel who would argue the case in future." Ministry officials said the counsel will also vet the government's stand on when the price will be reviewed.

The government's stand is that "any revision price proposal will be examined by the government after expiry of five years from commencement of supply and RIL will have to comply with the government decisions."

RIL wants the price of domestic gas be increased from the present of $4.2 per unit that was set by the government way back in 2007. However, the petroleum ministry is firm that RIL is bound by the decisions of the government. Any decision on price, quantity and tenure of gas supply can only be made in accordance government policies, it says.

While RIL's spokesperson refused comments, a source close to the company said, "RIL operates under a production sharing contract with the government and both sides are bound by the PSC and have certain obligations."

"The government has repeatedly stressed that it is committed to honouring the PSC and accordingly its policies are expected to be in alignment with the provisions. In case of any dispute regarding the interpretation of the provisions the PSC itself lays down procedures for redressal which again bind all the parties," the source said.

The government is banking on the May 7, 2010 Supreme Court verdict in the Ambani brothers' dispute. In that, the apex court had held that though the contractor (RIL) has the marketing freedom to sell the product from the contract area, this freedom is not absolute.

"The EGoM has already set the price of gas for the purpose of PSC. The parties must abide by this and other conditions," the ministry said quoting the judgment.