It is one PSU pitted against the other — for the non-payment of Rs 197 crore. Oil and Natural Gas Corporation (ONGC) has sought permission from the Ministry of Petroleum and Natural Gas to pursue arbitration against GAIL (India) Ltd. In a letter to the Committee on Disputes, ONGC has sought clearance for pursuing arbitration proceedings against GAIL along with JV partners British Gas Exploration and Production India Limited (BGEPIL) and Reliance Industries Limited (RIL). ONGC wants to pursue arbitration against GAIL for not paying the price differential on account of increase in price of gas as per provisions of the production sharing contract (PSC) of the Panna Mukta and Tapti fields. ONGC has said that this, along with interest, amounts to $48.06 million or Rs 197 crore (calculated up to April 2006) and is an amount that has not been paid by GAIL. As per the PSC, the floor and ceiling price of natural gas is specified as $2.11 per million British thermal unit (mmbtu) and $ 3.11/mmbtu respectively. The PSC also says that after 7 years of the date of first delivery, the seller has the option to revise the ceiling price to 150 per cent of 90 per cent of the same or equivalent basket of fuel oils used in calculating the base price averaged over the immediately preceding 18 months.According to this clause, ONGC along with its JV partners had revised the ceiling price to $5.57/mmbtu for Tapti and $5.73/mmbtu for Panna Mukta with effect from 26th June, 2004 (Tapti) and 6th February 2005 (Panna Mukta). It then raised invoices on Gail but says that the company did not pay the revised price and even refuted the claim by offering the earlier price of $3.11 to the non-payment of dues, ONGC’s JV partners BGEPIL and RIL went in for arbitration against GAIL. However, since ONGC is a PSU, it required clearance from the Committee on Disputes. The government had earlier taken a decision on this issue earlier, but the decision had been applicable from 1st April, 2005. The issue remained unresolved for the earlier period mentioned above.Regarding ONGC’s clearance for arbitration, the ministry has proposed that ONGC may participate in arbitration against GAIL. However, the award of arbitration may be given to ONGC also. This is because if ONGC does not participate in arbitration against GAIL, it will not get the dues from settlement. Industry sources say that in such a case, the dues will only be shared by RIL and British Gas. This has ONGC worried and it, thus, wants to pursue arbitration against GAIL along with its JV partners, RIL and BGEPIL.
