The Supreme Court on Friday allowed Reliance Industries to respond to a CAG report on pricing of gas produced at its KG-D6 block, which had sought dis-allowance of $357.16 million (about R2,179 crore) expenditure that RIL had incurred on drilling of wells and payments to contractors. The court also asked CPI leader and former MP Gurudas Dasgupta to give his views on the Centre’s new ‘Domestic Natural Gas Pricing’ guidelines that superseded the earlier Rangarajan panel.

The CAG report, which was placed before the apex court by counsel Prashant Bhushan, had citicised RIL for charging a rate in excess of the government approved price for its KG-D6 gas field and not including the marketing margin for calculating royalties and government’s share.

The national auditor also pulled up the Union oil ministry for delays in approvals and inconsistent parameters. While announcing an across-the-board 33% hike in natural gas prices on October 18 with the option of a revision every six monthly with a lag of three months, the government on November 1 notified the increase in natural gas price from $4.2 per million metric British thermal units (mmbtu) to $5.61 per mmbtu till March 31, 2015.

As per the new policy, which is applicable from November 1, the new gas prices have been fixed, solicitor general (SG) Ranjit Kumar told a bench headed by Justice TS Thakur. The SG argued that the government did not get any profit sharing from RIL and that the company did not even produce as per the PSC.

The government in its affidavit has sought dismissal of the PIL, saying “the issues relating to the alleged reduction in the production of natural gas and under-utilisation of the facilities is a matter which squarely falls within the realm of arbitration proceedings. In so far the revision in gas price is concerned, the said revision has been undertaken following due process keeping in mind the best interests of the people of the country and the energy security of India. The contractors have been allowed to retain only 1446.12 sq km. As far as the CAG report is concerned, the issues raised are pending for consideration before the Public Account Committee.”

Stating that he was “not happy with the new pricing guidelines”, RIL senior counsel Harish Salve said the company is resolving the price-hike issue through arbitration and he needs six weeks to “contradict CAG report line by line”. He further said the gas prices have already come down globally.

Bhushan, appearing for Common Cause, an NGO, has alleged that the CAG has found that RIL indulged in “gold-plating” and “over-invoicing” of expenditure, and also over-estimation of reserves. While seeking a court-monitored probe into the issue, Bhushan alleged that “they (RIL) are able to manage virtually all government authorities”.

At present, RIL is producing around 11 million metric standard cubic metres per day (mmscmd) of gas.

Pending award of arbitration, the government has disallowed higher gas rates for D1&D3, but RIL will get only $4.2, with the difference being deposited in a gas pool account maintained by state-owned GAIL. RIL will get the amount accumulated in the pool account if it wins the arbitration.

Senior CPI leader Gurudas Dasgupta and the NGO had challenged the then UPA government decision to double the price of natural gas from US $4.2 to $8.4 per mmbtu and sought cancellation of RIL’s contract for exploration of oil and gas from the KG basin.

The apex court has posted the matter for further hearing on March 20.