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Rediff.com  » Business » Govt claims final say in KG gas pricing

Govt claims final say in KG gas pricing

November 15, 2008 16:50 IST

The Union government today filed a fresh affidavit in the Bombay high court, which is hearing a dispute over supply of gas from Krishna Godavari basin, stating that any sale price less than $ 4.2 per mmBtu is not compatible with decisions taken by a ministerial panel.

The affidavit also states that selling price should be determined based on arm's length concept- where transaction is conducted purely on commercial terms. Further, it stated the formula under which the price is determined have to be mandatorily approved by the Government of India prior to the sale of gas.

The government in the affidavit said if the interim stay on sale of gas from KG basin is vacated, the allocation will be based on the gas allocation policy laid out by empowered group of ministers.

As per the allocation policy, fertiliser plants will have the first claim followed by idle power plants and city gas distribution in that order.

The Bombay high court on Tuesday had asked the Government of India counsel to file a fresh affidavit making a categorical statement on the pricing of gas and explaining why gas pricing is binding on all.

The price of gas is the most contentious issue in the court battle. Mukesh Ambani-controlled Reliance Industries and Anil Ambani's Reliance Natural Resources are involved in a legal battle over the gas supply master agreement, whereby RIL is to supply natural gas to RNRL for its power plants.

The government of India, which has been made a party to the case, says it can regulate the contract between RIL and RNRL. But RNRL is opposed to the government determining the price, claiming that its entitled to the gas at a much lower price of $ 2.34 per million British thermal unit.

The government official, who filed an affidavit in the RIL-RNRL gas supply dispute between the Ambani brothers, was asked by the Bombay high court to remain present on November 27.

During the case proceedings today, RNRL's senior counsel Ram Jethmalani said that he wanted to cross-examine the official from the Petroleum Ministry, Under Secretary, S M Sundaram. The division bench of Justice JN Patel and KK Tated said RNRL will have to apply for an application seeking permission to cross examine the ministry official.

"The court has ordered that the Under Secretary should be present in court for the next date of hearing," said Mukul Rohatgi, senior counsel, RNRL.

BS Reporters in Mumbai
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