RIL case: Dasgupta asks SC to order auction of K-G gas block

Arguments in the Reliance Industries Ltd gas pricing case continued in the Supreme Court for the second day on Wednesday, with the counsel for Gurudas Dasgupta, one of the petitioners, continuing to try and build a case of alleged collusion between the petroleum ministry and RIL.

The Communist Party of India leader's counsel Colin Gonsalves demanded that the Krishna-Godavari gas block allocated to RIL should be put on the block for auction.

The court was hearing a public interest suit jointly filed by Dasgupta and the activist organisation Common Cause, challenging the gas price rise expected to come into force from April.

The petitioners also questioned the feasibility of the gas price formula recommended by former Reserve Bank of India governor C Rangarajan, which will be used by the government to review gas prices every quarter.

Dasgupta's lawyer highlighted the reservations expressed by the parliamentary standing committee which had called for a review of the Rangarajan formula. The parliamentary panel headed by former finance minister Yashwant Sinha had also recommended an upper ceiling for gas prices.

Earlier, responding to an argument by counsel for Common Cause Prashant Bhushan that RIL was making windfall gains while government revenue was taking a hit, the bench said it was because of the structure of the contract. "If someone is spending on a project like this, he is not doing charity."

On the charge of gold-plating of costs, the counsel for RIL said, "Under the cost-recovery and production-sharing mechanism employed in the production sharing contract, the contractor derives absolutely no benefit from spending more by way of contract costs than is necessary to carry out exploration and development operations. It is the contractor who bears the risk.

''Petroleum may not be produced in sufficient quantities for it to recover costs associated with exploration and development of the block. But the government stands to receive a share of profit petroleum from the day that production starts."

The matter will be taken up for further hearing on 24 March, after the Holi break.