As the Supreme Court on Thursday questioned the rationale behind $4.20 (Rs 198) per units as the price of gas, Mukesh Ambani-led Reliance Industries Ltd (RIL) said it might not be able to “live up” to the commitment of supplying gas to Anil Ambani’s Reliance Energy Limited (REL) for its Dadri Power Plant.
“Was it not in the public interest that all should be supplied gas at the rate of $2.34 (Rs 111) per unit,” a bench headed by Chief Justice of India asked RIL counsel. “For making it from $2.34 to $4.20 per unit you are the beneficiary and not the public. Is it in the public interest.”
The court wanted to know how the government could regulate the gas price “arbitrarily” and whose interest was being protected.
Reliance Industries counsel Harish Salve replied that at $4.20 the government was earning more royalty or else the government would lose Rs 52,000 crore revenue.
Salve said selling gas at $2.34 per unit would be in national interest. “However, in that scenario, RIL would be pushed for nine years to make out cost recovery. This would otherwise be only four to five years,” Salve added.
The bench, however, countered: “Even at $4.20, government would not get any benefit because you would continue to get larger share in the profit till ninth year and your average share would be about 81 per cent in the profit.”
Earlier, Salve claimed before the court that the life of RIL’s gas reserves in KG-D6 basin was just 10 years, which meant it could supply gas only till 2019.
“Reliance Energy’s Dadri project has not even taken off,” Salve said. “If they start construction now, it would get over only by 2012. I can supply them gas for just seven years. But, in absence of the plant, I have to start supply somewhere.”