The central government has declared in Parliament several times that it did not fix the price of gas and that private operating companies have the freedom to do so, Anil Ambani-owed RNRL told a bench headed by Chief Justice K G Balakrishnan today.
Counsel Ram Jethmalani was resuming his arguments after four days in the appeals filed by RNRL, Mukesh Ambani-controlled RIL and the government on the Bombay high court judgement of July 15 in the Ambani family dispute over the Krishna-Godavari basin gas.
RIL, which operates the KG field, has said it cannot go by the family agreement on the price of gas to be supplied to RNRL, since the government later decided on a higher price. The government, too, has argued that it is the one to decide on the terms on which any gas is to be sold and two private parties can’t decide this mutually. The HC had upheld the family agreement terms and directed RIL to supply 28 mscmd of gas to RNRL for 17 years at the $2.34 per unit agreed in the family deal.
The thrust of Jethmalani’s argument was that the government had given RIL enough market freedom to fix price and distribute gas to its consumers. RIL’s present argument that it had to follow the government policy was a bogey, counsel stressed. To prove the government had no price policy at the relevant time, he quoted several answers given by the Ministry of Petroleum in the Lok Sabha and Rajya Sabha in recent years.
In one answer given two years earlier, the ministry stated that there were two rungs. One was the administered price mechanism for government companies like ONGC, where the price is fixed at a low level by the government. However, for private companies and joint ventures, the operators have been given freedom to market the product. The role of the government in the latter case was only to approve of the valuation and see the deal was clean and at arm’s length. This proved beyond doubt that government did not fix the price. Therefore, the assertion of RIL that it had to follow the price fixed by the government was false.
The price must be known to consumers and the public before the sale is struck. This was an elementary requirement of trade. “The price cannot come out of RIL’s pocket,” Jethmalani said. Since there was no price formula before 2007, the question of government approval did not arise.
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RNRL counsel further said that at two meetings of the empowered group of ministers, it was resolved that the sanctity of contracts should be honoured. They also averred that the price at which gas is given by RIL to government-owned NTPC was outside the purview of the empowered group. The government cannot turn around now and take a contrary stand.
If there was any change of policy, it must be prospective, not retrospective, unless there is a statutory basis for taking such a stand. Jethmalani reiterated his allegation against the ministry, that it was playing a fraud on the people and the court. Apart from the stand on the family deal, RNRL says there was also no independent verification, audit or approval of the transportation cost charged for the gas, which was increased by RIL to 0.72 cents.