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The Union government on Thursday joined the arbitration process initiated by Reliance Industries (RIL) and its partners over delay in revision of the price of natural gas from the Andhra offshore KG-D6 block. It appointed former Supreme Court judge G S Singhvi as its arbitrator.
RIL and its partners, BP Plc of the UK and Niko Resources of Canada, had on May 9 served a pre-arbitration notice on the government, alleging failure to implement the decision on a gas price rise with effect from April 1. This stalling, it said, was preventing sanctioning of investments of around $4 billion.
This was followed by a formal Notice of Arbitration served on June 17 by RIL-BP-Niko, naming London-based David Steel as their arbitrator. Under the production sharing contract, the government had 30 days ending July 17 to appoint its arbitrator.
The previous government had on January 10 notified a new domestic gas pricing formula that would have doubled the gas rates from April 1. However, general elections were announced before the new price could be announced.
The Election Commission asked the then government to leave the decision to the new government and revision of rates was put off to July 1. The new government last month decided to defer a decision until October, pending wider consultations.
The two sides are also involved in another dispute initiated in 2011, over falling output from the KG-D6 fields. That arbitration was initiated after the government disallowed RIL $1.8 billion of its investment due to the shortfall in production.
In that case, RIL and its partners have named former chief justice of India S P Bharucha as their arbitrator, while the government has chosen ex-CJI V N Khare. The Supreme Court in April appointed a retired Australian judge, Michael Hudson McHugh, to chair that arbitration.
