Clearing a major legal roadblock, the Bombay high court has allowed the Union government to proceed with pricing of the much-anticipated natural gas that Reliance Industries Ltd (RIL) will be bringing onshore from its Krishna-Godavari basin fields.
The decision sets the stage for intense lobbying to resume in New Delhi as potential customers for the gas, key Union ministries as well as states, such as Andhra Pradesh, seek preferential pricing.
RIL, which is slated to bring in 80 million standard cubic metres per day (mscmd) of gas from the second half of 2008, is hoping for $4.33 (Rs175) per million British thermal units (mBtu), excluding marketing margins and transportation costs. The company had submitted its formula for pricing to the government, which the petroleum ministry is in favour of approving. But the pricing methodology is being questioned by the power and fertilizer ministries (power and fertilizer plants are major users of gas) which, along with the Andhra government, want the gas at lower rates.
In a related development, the court also refused to stay an interim order that had barred RIL from selling the gas to any other firm except Reliance Natural Resources Ltd (RNRL), owned by Anil Ambani, younger brother of RIL owner Mukesh Ambani, and state-run National Thermal Power Corp. Ltd (NTPC).
The high court is hearing a dispute between the two firms and RIL over the supply of natural gas. The agreement between the two Ambani firms was signed as part of a January 2006 deal that saw the family business empire split between the two brothers.
The latest order, issued on Wednesday by the division bench of justices J.N. Patel and Ahmed Sayed, said: “We do not find anything in the impugned orders which prevent Central government from going ahead in the matter of price fixation under the production sharing contract between the Central government and the appellant.”
The bench also adjourned, by eight weeks, the hearing on RIL’s appeal against the previous interim order.
RIL had challenged Justice A.M. Khanvilkar’s May interim order restraining the company from selling 40mscmd of gas to customers other than RNRL and NTPC.
Last week, RNRL had argued in an affidavit that the gas price agreed to between it and RIL is not subject to government approval.