New Delhi, July 17 (PTI): The government today decided to join the arbitration initiated by Reliance Industries (RIL) and its partners over delay in the revision of natural gas prices, choosing former Supreme Court judge G.S. Singhvi as its arbitrator.
This is the second arbitration between Reliance and the government over the eastern offshore KG-D6 block. In November 2011, Reliance had initiated an arbitration against the government’s move to disallow the recovery of certain costs over gas output from the KG-D6 block not matching the targets.
With the government delaying a revision in prices, Reliance and its partners BP Plc of the UK and Canada’s Niko Resources had on June 17 served an arbitration notice on the government naming London-based Sir David Steel as its counsel.
“Justice G.S. Singhvi, former judge of the Supreme Court of India, has been nominated as arbitrator on behalf of the government of India in the arbitration initiated by RIL, Niko and BP against the government,” an official statement said.
The three companies want the government to honour its commitment and implement revised natural gas prices upon expiry of the $4.2 per million British thermal unit (mBtu) rate for their eastern offshore KG-D6 fields on March 31, 2014.
The previous UPA government had on January 10 notified a new gas pricing formula that would have doubled the rates from April but before it could announce the new price, general elections were declared.
The Election Commission asked the UPA to leave the decision to the new government and the revision of rates was put off till July 1. Last month, the BJP-led government decided to defer a decision by three months pending wider consultations on the formula.
Reliance, BP and Niko had on May 9 issued a “pre-arbitration notice” saying the failure to implement the increase in price from April was preventing them from sanctioning investments of almost $4 billion this year.
This arbitration notice wasn’t complete as the partners did not name their arbitrator as required for dispute resolution under the production-sharing contract (PSC).
RIL, BP, and Niko on June 17 served a formal arbitration notice naming Steel as their arbitrator.
While the government had not entertained the May 9 notice, it had 30 days to reply to the June 17 notice.