New Delhi: The Supreme Court on Monday admitted a public interest litigation (PIL) challenging the government’s recent decision to raise the price of natural gas produced in the country.

The government had raised the price at which gas will be sold to producers of power, fertilizers, minerals and steel, benefiting gas producers including Mukesh Ambani-led Reliance Industries Ltd (RIL) and state-run Oil and Natural Gas Corp. Ltd. The price increase will be effective from 1 April 2014.

While admitting the PIL filed by member of Parliament Gurudas Dasgupta and former power secretary E.A.S. Sarma, the court issued notices to the Union government, oil minister M. Veerappa Moily, India’s petroleum and natural gas ministry, RIL and Canada’s Niko Resources Ltd and BP Exploration (Alpha) Ltd.

The petition questions the acceptance of higher prices without strict scrutiny of its impact on the economy in general and the petroleum and fertilizer sectors in particular.

Communist Party of India leader Dasgupta has alleged that Moily helped RIL to increase the price of gas produced from the KG-D6 offshore gas field. Moily, on his part, alleged that import lobbies were trying to exert influence on India—even intimidating ministers—not to raise the domestic prices of gas and not to reduce overseas purchases.

While a text message left for Moily with his assistant remained unanswered, spokesperons for RIL and BP declined comment. The court has asked for responses in four weeks. It will again hear the matter on 6 September.

While Niko holds a 10% stake in the KG-D6 block, RIL and BP hold 60% and 30%, respectively.

The petition, a copy of which was reviewed by Mint, also asks the court to direct RIL and Niko to “relinquish those areas of the KG basin forthwith as are recommended by CAG in its report" and the government to take possession of those areas. The PIL also requested the gas prices to be fixed “in rupees and not dollars or any other currency", and “setting up a Special Investigation Team", for investigating the case.

The KG-D6 controversy arose after the Comptroller and Auditor General (CAG) of India said in a report that RIL had breached some terms of its contract with the government. The company had failed to meet its own target for gas generation in the KG-D6 fields, despite having claimed associated costs as deductions before estimating the profit to be shared with the government.

The petroleum ministry has proposed to deny RIL $1.24 billion in costs. The ministry wants to disallow the country’s biggest refiner this cost recovery from the deepwater KG-D6 fields in the Bay of Bengal for 2010-11 and 2011-12. The issue is currently in arbitration.

The petition also requested the court that arbitrators, earlier appointed by the government and RIL “appoint the third arbitrator (umpire) and to proceed with the arbitration expeditiously and complete the arbitration within 6 months".

The petition alleged that, “when the present petroleum minister took charge he stalled the arbitration thus preventing the recovery of this amount from the sale of natural gas".

Suggesting that an exception had been made in RIL’s case for the D6 block, CAG had earlier said the explorer was allowed to retain the entire 7,645 sq. km area and enter the second and the third phases without “relinquishing 25% each of the total contract area at the end of phase I and phase II in June 2004 and 2005, respectively", in contravention of the production-sharing contract.

Welcoming the court’s decision, Dasgupta said that in earlier discussions in the Lok Sabha, he had pointed out that when the executive fails, it is bound to make room for the judiciary.

“The manner in which arbitrarily prices were fixed on (the basis of the) Rangarajan Committee formula, is a matter of grave concern," he said. He added that he had already written a letter to the Prime Minister, apprising him of the increase but “no assurance was given (by the Prime Minister) to review the decision. This insensitivity of the government is undermining the democracy".

A panel headed by C. Rangarajan, head of the Prime Minister’s economic advisory council, had suggested a pricing formula based on which the controversial gas price decision was taken.

In a 26 July press note, Moily said, “the government needs to move ahead and take bold decisions and should not be bogged down by the fear of CBI or CAG." He also stated that there is an urgent need to destroy bureaucratic delays, saying “process should not dominate; instead the focus should be on delivery".

Close