New price norms for RIL’s D6 gas not beyond review: SC

India's Supreme Court today observed that the matter of the government allowing Reliance Industries Ltd to hike prices of gas from its D6 block in the offshore Krishna-Godavari Basin is not final and is subject to review, while adjourning further hearing on the issue to 4 March.

The apex court is hearing a public interest litigation (PIL) filed by Communist Party of India leader Gurudas Dasgupta, MP, and the independent organisation Common Cause. They allege that minister for petroleum and natural gas M Veerappa Moily helped RIL to increase the price of gas produced from the KG-D6 gas field.

In June 2013, the government doubled the price for locally-produced natural gas from $4.2 per million British thermal unit to $8.4 mbtu from April 2014, but the finance ministry later said prices for Reliance should be capped because the company's gas production from the offshore D6 block was far below its supply commitment.

However, last month, the union cabinet allowed RIL to charge higher prices for gas from April after the company offered financial guarantees to settle any claims against it over a shortfall in gas output (See: RIL, BP to double gas price on a $1.2 bn bank guarantee )

In his latest affidavit, Dasgupta has disputed the credentials of the Rangarajan Committee, which proposed a new formula for fixing the price of domestically-produced natural gas, leading to a near-doubling of prices to around $8.4 per million British thermal units.

The affidavit points out that J Mauskar, former special secretary and a member of the Rangarajan panel, joined Observer Research Foundation, a think-tank funded by Reliance, after the panel's report was submitted to the government.

"It shows there is a clear quid pro quo: the member of the so-called expert committee has joined the company that benefits from its recommendations," claims the affidavit filed in response to the stand taken by the government, petroleum minister Veerappa Moily and RIL.

Dasgupta's affidavit requests the court to summon all relevant records from the petroleum ministry to ascertain the veracity of his claims regarding the "malafide" actions of Moily. "Overruling senior officers of the ministry repeatedly when every such decision resulted in huge profits for Reliance cannot be camouflaged as detailed consultation," it says.

Dasgupta also sought a probe by the court into the alleged volte face by the government, which had earlier maintained it was taking action to penalise RIL for the falling output, but is now supporting increase in price against a bank guarantee. "The reasons for this about-turn need be to gone into and the Hon'ble Court should call for the records of the finance ministry to ascertain what prompted these changes," he said in his affidavit.

"The power of the government in fixing gas prices is not being questioned. What is doubtful is whether this power has been used in a fair and judicious manner. The action of the petroleum minister in repeatedly overruling his senior officers in all matters relating to this petition is well-documented. Thus, the entire exercise has been a colourable exercise of power by the government with the sole intention of giving benefit to Reliance," it says.