The Supreme Court granted Mukesh Ambani’s Reliance Industries Ltd (RIL), six weeks’ time to answer to the CAG report on gas pricing from the KG basin.
The Supreme Court announced the next hearing to be scheduled for March 20 during which it the RIL’s response to the CAG report will be put under scrutiny which earlier had sought refusal of 357.16 million dollars (about Rs 2,179 crore) worth of expenditure which was sustained by RIL on drilling of wells and payments to contractors in KG-D6.
In October 2007, the government had fixed a sale price of 4.20 dollars per million British thermal unit (MMBTU) based solely on the costs discovered by RIL from major customers.
Under the newly invoked domestic gas pricing instructions, the price of gas has been fixed at 5.61 dollars MMBTU up from earlier price of 4.2 dollars MMBTU. The new price came into effect on November 1, 2014.
The court hearing is for challenging an earlier UPA-II government decision of doubling the costs of gas which were being produced domestically, which was alleged that it sole purpose was to benefit RIL.
Mr. Dasgupta and Common Cause petitioned the court for challenging the decision to double the gas prices from 4.2 dollars MMBTU to 8.4 dollars MMBTU acclaiming that it was to give a certain set advantage to RIL that was researching in the area of gas exploration and production in KG basin.
The Rangarajan theory of gas pricing was acclaimed by the previous UPA government. Rangarajan was Chairman, Economic Advisory Council to the then Prime Minister.
The CAG has affirmed in an audit report draft of RIL’s eastern offshore KG-D6 block expenditures stated that the company has charged 4.205 dollars per mmBtu from their customers all over the globe, leading to an excess in billing of $9.68 million.