Reliance Natural Resources Ltd (RNRL), in its reply to a special leave petition filed by Reliance Industries Ltd (RIL) in the Supreme Court, on Wednesday contended that the profit sharing contract does not require that the government approves the price of sale but only mandates approval of the valuation of the gas.

There is nothing in the PSC which prohibits RIL from selling gas at a price other than the value fixed by the government. Therefore, RIL is at complete liberty to sell gas to RNRL at the agreed price of $2.34 per mmbtu. This has also been repeatedly clarified by the government in Parliament.

Further, RNRL has questioned the propriety of RIL in raising the issue of profits that it may earn out of gas it gets from RIL. “The profits that RNRL may make are not concerns of RIL. In fact, RNRL was created just so that it could earn such a profit. Otherwise, there was no need to create such an entity,” the company said.

?Assuming that RIL does not sell gas to RNRL at this price, it would presumably sell this gas to other parties at $4.2 per mmBtu and would pocket the difference between $2.34 and $4.2 for itself. The question then is whether it is RIL or RNRL which should earn this amount, and not whether the government is entitled to the same,? RNRL said.

RIL has approached the Apex Court challenging the Bombay High Court order which had asked RIL to supply 28 mmscmd of KG D6 gas to RNRL for 17 years at $2.34 per mmbtu, a price that is 44% lower than the $4.2 per mmbtu fixed by the government. RIL has also made the government a respondent. The Apex ourt heard the petition for admission on July 7 and asked RIL, RNRL and the Centre to file their replies. The next hearing is slated for July 22.

RNRL submitted that the PSC does not permit the government to allocate gas to certain sectors in relation to gas belonging to the share of the contractor. In fact, such a contention is completely contrary to the provisions of Article 21.3 of the PSC as well as RIL’s stand. In view of the marketing freedom accorded to RIL under the PSC, there is no question of an administered price mechanism and the possibility of RNRL receiving gas at a price lower than its competitor cannot be a ground for RIL refusing to honour its commitment.

According to RNRL, the sale of gas is from RIL’s share over which it has complete marketing freedom. RNRL is not concerned with any part of the government’s share of gas, it said, adding the impugned Bombay High Court judgment had no fiscal impact on the government and protected its interests.

The Bombay High Court in its June 15 order had held that the government was free to put price on gas that might be different from the price at which RIL sells the same to RNRL.