RIL-RNRL gas transaction not fair, Centre tells SC

“The transaction between RIL and RNRL cannot be said at ‘arm’s length basis’, since the two were related entities when the GSMA was entered into between them,” said Additional Solicitor General Mohan Parasaran.

According to the production sharing contract (PSC), the contractor does not have a marketing freedom for selling natural gas in the domestic market.
The contractor is required to sell the natural gas at arm’s length basis on a price approved by the government, he told a bench headed by Chief Justice K G Balakrishnan. In the meeting of the Empowered Group of Ministers (EGOM) on May 28, 2008, it was decided that the contractor would sell gas from NELP to consumers in accordance with the marketing priorities determined by the government, Parasaran said.

“Prior approval of price based on competitive arms-length sale is essential to achieve a level playing field for all consumers downstream to achieve business harmony and equilibrium,” he said.

Government said Dadri plant of RNRL is neither installed nor functional. Government will allocate gas to Dadri Power Plant subject to the availability of natural gas and it would be treated on the same footing as other similar plants under similar circumstances.

The Bombay High Court ruling is not binding on government as such decision itself is amenable for being set aside as discriminatory, arbitrary and violative of fundamental rights in constitution of India.

He said the government had already rejected the proposal for supply of gas to RNRL at US$2.34 as it was not in consonance with the policies of the government. Parasaran said the issue of supply of gas to NTPC by the RIL is pending before the Bombay High Court and should be kept aside from this litigation Additional Solicitor General Vivek Tanka appearing for Ministry of Oil and Natural Gas said that by supplying gas at US$2.34 the government would be losing Rs 75,000 crore.
The natural gas from the KG 6 has been supplied to the fertilizer and power sectors which had been starving of fuel to operate their plants. The Ministry advocate would continue his argument on Thursday.