KG basin gas row: Andhra high court issues notices to Reliance, Centre

Petition seeks court-monitored CBI probe into gas field allocation, gas pricing and related matters

By M Suchitra
Published: Friday 14 March 2014

The Andhra Pradesh High Court has taken cognisance of a complaint regarding alleged connivance between Central and state governments and Reliance Industries Limited (RIL) in the Krishna-Godavari (KG) basin gas field allocation, gas pricing and related matters. On March 10, the court issued notices to the Central government, the state government,  RIL, the Directorate General of Hydrocarbons, New Delhi and the Central Bureau of Investigation.

A division bench of the court issued the order while considering a public interest petition filed by Palem Srikanth Reddy, president of the Jana Palana Party, a Hyderabad-based social organisation. In his petition, Reddy has alleged that connivance between the Central and state governments and RIL has deprived the people of Andhra Pradesh the benefits of natural resources like hydrocarbons. “Natural resources belong to the people, and the state government is the custodian of natural resources. However, allocation of the D6 block to Reliance in KG Basin has violated the interests of the state and its people,” argues the petitioner.

The KG basin in Andhra Pradesh is considered to be the largest natural gas basin in the country. In 1999, the Central government came up with the New Exploration Licensing Policy (NELP), allowing private players to enter the fray for exploration and production of gas and oil. Reliance Industries, before it was divided between the Ambani brothers—Mukesh and Anil—bagged the contract for D6 block with 7,645 sq km area for exploration and production of gas/oil. In April 2000, a production sharing contract was signed between the government and RIL and its minor partner, NIKO Resources Ltd, a Canadian company having 10 per cent stake for exploration and production of gas or oil. RIL dug 18 gas wells and one oil well in the KG basin.

After RIL was awarded contract and as the gas discoveries were made, the state government and many private companies set up gas-based power plants in the state. In 2000, the government acquired more than 90 hectares of private land for RIL at Shankerpally village in Ranga Reddy district for establishing a 1,400 MW gas-based thermal power station. While the power station is yet to be built, the state exchequer has suffered losses since it was paying compensation to the land owners, says the petitioner. According to the petitioner, due to short supply of gas, all the gas based-power plants in Andhra Pradesh are lying idle even as the state reels under acute power crisis.

Starved for gas

Due to the dilatory tactics of RIL in supplying gas, the private players who have established gas-based power plants in the state were forced to go in for corporate debt restructuring (CDR), facing a potential threat of being declared as non-performing assets, contends the petitioner. According to him, despite Andhra Pradesh having natural gas resources in KG basin, the power production in the state through gas is only 272 MW, while that of Maharashtra and Gujarat are 852 MW and 949 MW respectively.

The petitioner has also submitted that even as Reliance was demanding un-reasonable revision of gas price from the the Central government, the production has come down. According to the petitioner, only nine wells  out of the 18 are in production. He further says that the gas production is reported to be at just 14.63 million standard cubic metre per day, which is a mere 18 per cent of the targeted rate of 80 mmscmd in 2012-13. Reliance is not adhering to the approved plan and not putting more gas fields under production have caused a heavy loss to the economy, forced several power plants to stop production, increased inflation and forced consumers and industry to purchase gas from abroad, points out the petitioner. However, instead of cancelling the allotment, the ministries of power and petroleum and natural gas were hand in glove with the company, argues the petitioner. Lack of gas has forced the state to purchase power at high prices and the burden is passed on to consumers, alleges the petitioner.

CAG report and acts of collusion
The petition has also highlighted the 2011 report of the Comptroller and Auditor General (CAG) of India which made a detailed scrutiny of Hydrocarbon Production Sharing Contract signed by the Central government with Reliance, and the company’s performance in gas exploration, investments and pricing of the gas produced. The report highlighted the connivance between the Union Ministry of Petroleum and Natural Gas, Director General of Hydrocarbons and the company. As per the contract, the exploration was divided into three phases. After phase III, the contractors were to hold on to only that area where they discovered the petroleum resources in commercially viable quantities after drilling wells. The rest of the area was supposed to go back to the government. However, in 2009 RIL succeeded in pushing the Central government to declare the whole of the 7,600 sq km as “discovery area”, CAG had pointed out. The report had also pointed out how Reliance violated its gas supply contract with the National Thermal Power Corporation, a government undertaking while the Central government sided with Reliance, how Reliance forced the government to hike gas price in favour of the company and how Reliance drastically reduced and delayed the profit sharing with the government.

The petition has made the Union power secretary, the secretary of petroleum and natural gas, Andhra Pradesh energy secretary, managing directors of the Andhra Pradesh Power Generation Corporation (APGENCO) and the Andhra Pradesh Power Transmission Corporation (APTRANCO) and political parties such as the Indian National Congress, Bharatiya Janata Party (BJP), Telugu Desam Party (TDP) and YSR Congress respondents in the case “for their connivance with Reliance and inaction in Andhra Pradesh getting its due share of natural gas and benefits of natural resources”.

The petitioner asked the court to order a CBI probe into the whole issue under the direct supervision of the court and also requested the court to direct the government to take appropriate steps to see that Andhra Pradesh gets its due share of gas allocation as the oil and gas field are located near the state.

The court has posted the matter for further hearing on April 2.

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