Mumbai, Nov. 14: The Centre today submitted before Bombay High Court that Reliance Industries Ltd (RIL) could not sell gas from the Krishna-Godavari basin to Anil Ambani’s Reliance Natural Resources Ltd (RNRL) at a price that was less than $4.20 per million British thermal unit (mBtu).

The Ambani brothers have been locked in a raging dispute over gas allocation and pricing ever since the Reliance empire was carved up in early 2006. Anil Ambani claims he has agreements with brother Mukesh that entitle him to the gas at a price of $2.34 per mBtu.

This is the first time that the Centre has filed an affidavit in the court in relation to the two-year-old battle.

The counsel for the government said a contractor was obliged to sell gas at an arm’s length basis to its buyer under a formula that had been approved by the government. The formula had determined the price of gas at $4.20 per mBtu.

The eight-page affidavit, which was presented by Mohan Parasaran, additional solicitor general of India, is considered crucial since it clarifies the government’s stand on the pricing of gas.

The key theme of the affidavit is that the government can regulate any contract between the two companies.

Parasaran said under the terms of article 21.6.1 of the production-sharing contract that says all oil concessionaires must sign with the government, the contractor shall endeavour to sell all natural gas produced and saved from the contract area at arm’s length prices.

This price will be determined by a formula and approved by the government prior to the sale of natural gas.

RNRL claims that it is entitled to 28 million standard cubic metres per day (mscmd) of gas for 17 years at $2.34 per mBtu. RIL has maintained that the government must approve the price at which it sells the gas to any consumer, including RNRL.

RNRL has contested this point. Its contention is that the government should not be concerned in a transaction between two separate parties.

The affidavit said the contractor (RIL) had approached the government, seeking approval of the price formula for the purpose of gas sale to RNRL. However, its proposal was rejected as it had not been determined on an arm’s length basis.