RIL arbitration on gas pricing can’t be allowed: Centre to SC

The matter came up for hearing on Monday before a bench led by Justice Ranjan Gogoi which will examine the matter on May 1 now.

Written by Utkarsh Anand | New Delhi | Published:April 14, 2015 1:44 am
reliance petrol, ongc, raw This is the second arbitration between RIL and the government over the eastern offshore block.

The Centre on Monday told the Supreme Court that fixation of natural gas price was within its exclusive domain and hence the Reliance India Ltd (RIL) cannot be allowed to initiate arbitration proceedings over pricing and product sharing contracts (PSC) for KG- D6 basin.

This is the second arbitration between RIL and the government over the eastern offshore block. In November 2011, Reliance had initiated an arbitration against the government’s move to disallow the recovery of certain costs over gas output from the KG-D6 block not matching the targets. There is also a batch of PILs pending in the top court against upward revision of gas pricing.

Meanwhile, asserting that gas pricing was not an arbitrable issue but a matter of economic decision, the government has further accused the Mukesh Ambani-led company of acting with “malafide” in demanding implementation of January 2014 guidelines under which the gas prices was sought to be doubled. The government has already issued revised guidelines in October 2014, superseding the January guidelines.

“Action demanding implementation of a particular policy under the threat of impending arbitration proceedings goes to show the malafide intention of the petitioners behind issuance of such notices invoking arbitration … it goes to show the malafide conduct and intention in initiating the purported arbitration,” said the government. The controversy took the new turn as the government filed its affidavit, which opposed arbitration with RIL on the issue and said: “The petitioners as private parties seek to decide which economic policy of the government should be implemented and which one should be rejected under the guise of the said PSC.” It is only the government that can make decisions for effecting economic policies and such actions cannot be determined by a private party under a private contract, it stated. Asking RIL fight it out in the court instead of an arbitral tribunal, the affidavit said that the issue of gas pricing was not a subject of any arbitration proceedings.

It added: “The power of the government to frame pricing guidelines is not only to ensure that the price at which it is being sold is not too low but also to ensure that the market is regulated and it is not left to be determined at the hands of the private players as has been sought by the RIL.” On merits, the government said that RIL’s insistence on appointment of third arbitrator of neutral nationality was also wrong and argued that a third arbitrator should preferably be from India because of various links this country has with the dispute in question.

The matter came up for hearing on Monday before a bench led by Justice Ranjan Gogoi which will examine the matter on May 1 now.

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