Anil Ambani-led RNRL’s counsel Ram Jethmalani on Tuesday sought to rubbish RIL’s contention that the gas supply and its price is governed by government policy. He quoted the petroleum ministry’s answers in parliament saying RIL has full marketing freedom on the Krishna-Godavari gas.
In its replies to questions on the issue inside and outside parliament, the ministry has maintained in unambiguous terms that the contractor, Reliance Industries, enjoys complete freedom to market the natural resource. The government, however, says in its appeal that gas, being a natural resource, belongs to the country.
Jethmalani, who concluded his arguments on Tuesday, contended that subsequently, the ministry attempted to convey an impression, rather unsuccessfully, that the pricing of natural gas by RIL was subject to some government control.
A bench of Chief Justice K G Balakrishnan and Justices B Sudershan Reddy and P Sathasivam is seized of the cross appeals filed by RIL, RNRL, the Union government and the petroleum ministry, raising the key issue whether RIL could supply gas at the mutually agreed price to RNRL.
There are divergent judgments by the Bombay HC on the issue involving a part of the Ambani family MoU signed between the two brothers and their mother Kokilaben in 2005.
Meanwhile, solicitor-general Gopal Subramanium said NTPC would file its affidavit by Wednesday.
The dispute hinges on RNRL’s claim for supply of 28 mmscmdof gas for 17 years at $2.34 per unit.
RIL says it can’t honour this commitment as it is bound by the government’s gas supply contract and gas utilisation policy.
Insisting RIL supply at the agreed price, Jethmalani argued in terms of the production-sharing contract signed by the government under the NELP regime, the operators have the freedom to market gas within India, including Uttar Pradesh.
In fact, the then minister of state for petroleum, Dinsha Patel, had said so in the Rajya Sabha on August 21, 2007. Samajwadi Party MPs had raised the issue regarding the source of gas for RNRL’s Dadri power plant.
“Obviously, the minister’s answer on contractor’s (RIL) right to supply gas is unqualified and uncontrolled by anything,” he added.
He also referred to the government’s replies to various questions in parliament on the issue of “criteria for price fixation on gas from the Krishna-Godavari basin”.
“The production-sharing contract provides for pricing of gas on the basis of sales on arms length principles,” he argued. He asserted that as per this minister’s answer, “a formula for pricing needed to exist,” which, however, “did not exist at all”. “So the question of the approval does not arise at all and the conduct of the government is eloquent,” Jethmalani added.
Govt allows full deduction of capex for energy pipelines
As Ram Jethmalani was busy inside the court explaining why RNRL should get gas from RIL at the mutually agreed price, the government informed the Rajya Sabha that it
has allowed companies to deduct all capital expenditure incurred in laying and operating cross-country natural gas, crude or petroleum oil pipeline network, for calculating corporate tax liability.
To a query if this section was inserted to give a benefit of Rs 20,000 crore to Reliance Gas Transportation Infrastructure Ltd, S S Palanimanickam, minister of state for finance, said such deductions are also available for those involved in setting up and operating a cold chain and warehousing facility for storage of agriculture produce.
The section allows these undertakings to claim the entire capital as deduction in the year in which it is incurred, against the earlier provision in which deduction is permitted as depreciation in subsequent years, the minister said. This only results in postponement of tax liability.
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