SC extends stay on LNG pricing, to take up issue on 14 Aug

SC extends stay on LNG pricing, to take up issue on 14 Aug
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First Published: Tue, Aug 07 2007. 07 38 PM IST
Updated: Tue, Aug 07 2007. 07 38 PM IST
New Delhi: The Supreme Court on 7 August extended a stay granted by Gujarat High Court on a government directive to pool prices of imported liquefied natural gas so as to keep the generation cost from the Dabhol power plant low.
A bench headed by Justice Ashok Bhan while issuing notices on new applications filed by Maharashtra government and public sector firms GAIL, IOC and BPCL ordered status quo till 9 August in view of the cases coming up before Delhi High Court and Gujarat High Court on 8 and 9 August respectively.
The bench also said the issue of vacating stay on the government directive would be decided on 14 August.
Essar Steel had earlier challenged government’s decision of averaging the long-term LNG price of Petronet LNG Ltd with the high cost short-term fuel purchase for Dabhol power plant in Delhi High Court. Gujarat State Petroleum Corporation had challenged the order, which raised prices of LNG for existing Petronet customers, in Gujarat High Court.
Seeking vacation of the interim stay granted by the Gujarat High Court on 31 July, GAIL in its application stated if the policy was not implemented its pipeline, which connects Dahej in Gujarat to the Dabhol plant in Maharashtra, would remain idle and the entire investment would be wasted.
The Maharashtra government and the state electricity board sought vacation of stay on the ground that there was a real urgency as the Dabhol project would come to a halt if LNG was not supplied by GAIL.
According to the PSUs, if price pooling was not allowed, they would not be able to sell RLNG purchased at a price in excess of $9 per million British thermal unit (mBtu) from Petronet. Such “distress sale would be huge and a straight loss to it”, GAIL said.
GAIL said the petitioners before the high court can be compensated in case the government policy was finally set aside. It added that “loss to consumers, idling power plants and huge financial loss on a daily basis are likely to ensue in the event the impugned order is allowed to subsist”.
The new policy has resulted in price differences in RNLG for existing consumers such as Essar Steel and GSPC and new consumers such as Ratnagiri Gas and Power Pvt Ltd, the owner of the Dabhol power plant.
Petronet LNG Ltd, the primary supplier of the fuel, had moved an application for vacation of stay in view of the apex court’s direction on 31 July to do so in case any of the high courts passed any interim order on the issue.
The government in order to make fuel affordable to Dabhol plant had decided to raise the price of LNG imported by Petronet from RasGas of Qatar on two long-term contracts by averaging its price with the costlier LNG imported for RGPPL.
Petronet’s long-term LNG price of $2.53 per mBtu was averaged with spot LNG priced at about $8.5 per mBtu.
The apex court had earlier issued notices to the Centre and state-run firms IOC, BPCl, GAIL, Essar and Gujarat State Petroleum Corp (GSPC) on a request by Petronet, Indian Oil, and Bharat Petroleum for clubbing of a bunch of petitions challenging the government order of raising LNG price.
Petronet and its PSU partners — IOC and BPCL — had contended before the Supreme Court that the validity of the Petroleum Ministry’s letter dated 6 March, 2007 on uniform pooled price of RLNG, which is to be decided by different courts, had the risk of leading to multiplicity of proceedings and conflict of decisions.
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First Published: Tue, Aug 07 2007. 07 38 PM IST