SUPREME COURT ADMITS GOVT PLEA ON KG GAS DISPUTE

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THE Supreme Court has turned down Reliance Natural Resources Ltd’s (RNRL) plea to dismiss the government’s petition for becoming an independent party in the Krishna-Godavari gas dispute. Accepting the government’s plea to quash the memorandum of understanding (MoU) between Reliance Industries Ltd (RIL) and RNRL, the court directed the two companies to file their objections to the same.

According to the MoU signed in 2005, as part of a settlement on the division of the Reliance industrial empire between the Ambani brothers—Mukesh and Anil—RIL is to supply 28 million standard cubic metres per day (mmscmd) of gas to RNRL at $2.34 per million British thermal unit (mBtu). This price is at a 44% discount to the $4.20 per mBtu price fixed later by the government for sale of gas by RIL.

A two-judge bench headed by Chief Justice KG Balakrishnan heard the pleas on gas allocation by RIL, RNRL, the government and some independent power companies. The court directed the matter to a threejudge Bench, which will now hear the case on September 1.

Seeking the setting aside of the Bombay High Court order asking RIL to supply gas to RNRL at $2.34 per mBtu, the government said the ruling was in contradiction to its gas allocation policy to priority sectors such as fertiliser and power. “If the government is aggrieved in the case, it has to be heard,” the court remarked. It then issued notices to both RIL and RNRL seeking their objections to the Centre’s plea on the matter.

Senior counsel Mukul Rohatgi, on behalf of RNRL, said the government was merely an intervenor before the Bombay High Court in the case. It had no role to play in the private dispute between the two brothers by filing a special leave petition (SLP) in the case, he added.

This was, however, opposed by the government’s counsel, additional solicitor-general Mohan Parasaran, who said the government’s role is vital in the case and needs to be heard.

The court also sought responses of RIL and RNRL on the government’s plea, which said it had sovereign right over natural gas in the country. “The production sharing contract (PSC) signed between the government and the contractor provides for government approval in matters of utilisation as well as pricing whereas the MoU apportions the whole of the production among certain individuals/companies. The PSC and the government’s sovereign rights have to take precedence in the wider and larger public interest,” said the government in its SLP.

The KG slugfest between the two brothers over the role of the government in the case saw bitter acrimony during the proceedings of the court. Former Union law minister Ram Jethmalani, appearing on behalf of RNRL, alleged before the bench, “The role of the government is the worst in the case.”

On the other hand, senior counsel Harish Salve, on behalf of RIL, said the government should be made a respondent in the case. The government should not have any objection in becoming a party to the case, submitted Mr Salve pressing its SLP in the case.

RIL, in its petition in the apex court has sought direction to make the government a respondent and not simply an intervenor. Subsequently, government had filed a SLP in the case, joining as an independent party.

The court also sought explanations from RNRL and RIL, on the plea of some private power companies such as Andhra Pradesh-based Gautami Power and GVK power that had moved intervention applications in the case. The Bombay High Court ruling upholding allocation of gas to RNRL as per the MoU would deprive these companies of the gas they currently obtain under the operative gas utilisation policy.

Senior counsel Ashok Desai, on behalf of the intervenor companies, said the case does have a bearing upon such companies as they are also recipient of the gas from the KG basin.

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