Gas exploration from KG basin: SC asks RIL to reply in 4 weeks

The Supreme Court today gave four more weeks to Mukesh Ambani's Reliance Industries Ltd (RIL) and others to respond to the final CAG report which found alleged irregularities, including in payments to contractors on drilling of D6 wells at the Krishna-Godavari basin.

The apex court posted the matter for hearing on May 5 when it would decide the time likely to be given to each party in the matter to put forward their arguments.

On January 6, the court had asked all the parties to complete their replies within six weeks.

A bench comprising justices T S Thakur, J Chelameswar and Kurian Joseph would examine the RIL's response to the CAG report that had sought disallowance of USD 357.16 million (about Rs 2,179 crore) expenditure RIL had incurred on drilling of wells and payments to contractors in KG-D6.

The order was passed during a brief hearing of petitions filed in 2013 by senior CPI leader Gurudas Dasgupta and NGO Common Cause, challenging the erstwhile UPA government's decision to double the price of natural gas from USD 4.2 to USD 8.4 per mmbtu and seeking cancellation of RIL's contract for exploration of oil and gas from the KG basin.

Senior advocate Harish Salve, appearing for RIL, sought additional three to four weeks to respond to the CAG report.

Solicitor General Ranjit Kumar said the Centre can make comments on the Comptroller and Auditor General (CAG) recommendations and findings only after getting the report of Parliament's Public Account Committee which was examining it.

The third PIL on the issue has been filed by advocate M L Sharma.

Earlier, the court had allowed Dasgupta and other petitioners to file their responses to the NDA government's fresh guidelines which would "supersede" the UPA regime's policy on price fixation for natural gas, including that from KG basin, which has been the bone of contention between the Centre and RIL.

On November 14 last, the Solicitor General had said before the bench that the 'new domestic natural gas policy' has been approved by the NDA government on October 18, raising natural gas price to USD 5.61 per mmbtu from November 1. He had also said that the recommendations of the Rangarajan Committee "would not be given effect".

The Rangarajan formula on gas pricing was approved by the UPA government. Rangarajan was Chairman, Economic Advisory Council, to the then Prime Minister.

In its second audit of RIL's eastern offshore KG-D6 block, the CAG on November 28 had recommended disallowing the company from recovering USD 279.8 million in cost of three wells as well as a part of expenditure the firm had incurred in the area which was improperly declared discovery area.

Earlier RIL's senior advocate Harish Salve had said "he is not happy with the new guidelines (on gas pricing)".

While the Centre has maintained that the issue raised by Dasgupta has been addressed with the new guidelines, advocate Prashant Bhushan, appearing for the NGO, had said several other issues needed to be argued.

He had said that the draft CAG report itself suggested that RIL "hugely over-estimated" the reserves of the KG gas block and other irregularities are cited.

Among the other issues, the NGO has alleged that fraud was committed by RIL requiring government to take back the field and there was a need for court-monitored probe on the issue.

Dasgupta and the NGO had said government should be asked not to make "any further increase" in the price of gas produced by RIL from KG basin.

RIL refuted the allegation of extraneous considerations for the hike in price of gas from 4.2 dollar to 8.4 dollar per mmbtu taken from the existing fields like KG D-6 basin.

It had submitted that the gas output from KG basin had fallen to 8 mscmd against expected 80 mscmd due to "technical reason".

M Veerappa Moily, then Union Minister of Petroleum and Natural Gas, was also named as one of the respondents in the petitions.

The PILs have also sought imposition of penalty on private parties for failure in adhering to commitments.

The petitioners have sought a direction for a thorough audit by CAG of the working of the production-sharing contract (PSC) governing KG block, gold plating, underproduction and other related issues.

The former CPI MP had alleged collusion between the government and the company and said that natural resources belong to the citizens and the government.

The Common Cause had supported Dasgupta's arguments and referred to controversial intercepted telephonic conversations between former corporate lobbyist Niira Radia with others to support the allegation of collusion.

The NGO has urged that the Centre should await the outcome of the two petitions pending before the apex court.