The oil ministry has told the Supreme Court that Anil Ambani’s Reliance Natural Resources (RNRL) was fully aware that the Production Sharing Contract between Reliance Industries and the government for KG basin gas required the prices to be approved by the government.

The parties who entered into private contract were fully aware of the provisions of the PSC and it is respectfully submitted that a natural asset as rare as gas can not be the subject matter of this sort of a division to sort out dispute amongst two brothers of a family which controls mega industries,” said the ministry in an affidavit filed in the apex court. RNRL has claimed that the memorandum of understanding singed on June 18, 2005 between the estranged Ambani brothers for supply of KG D6 gas is based on a similar contract (which is the subject of a separate legal fight) with NTPC. The power company has said that RIL had never claimed that the price would have to be approved by the government.

The chairman and managing director of NTPC, RS Sharma, on August 17, 2009 had written a letter to power secretary H Brahma saying, “While submitting its (RIL) bid to NTPC in 2003, they were fully aware of the provisions of the PSC (signed in 2000). RIL in its bid never stated that the contract shall require government approval.” On August 28, 2009, Mr Sharma again wrote to Mr Brahma: “NTPC reiterates its position that RIL did not mention in its bid that price of gas shall be subject to approval of the government.”

The government said in its affidavit that the core issue which arises for consideration in its Special Leave Petition relates to whether RNRL by means of the private agreement, which it entered into with RIL, can get supply of 28 million cubic meters of gas per day for 17 years at the price of $2.34 per million British Thermal units (mmBtu). “The government is only agitating the principle as to whether private parties can at their sweet will and pleasure divide the national resources of the country after the contractor has entered into a solemn PSC which has parliamentary approval,” said the affidavit. RIL had told the apex court that all gas belongs to the government till the point of its delivery to the consumer by the contractor.

RNRL, however, is maintaining that it is clear from the term ‘production sharing contract’ itself, that the sharing of the gas relates to its production and once that happens, the title passes to the contractor. Government has no control over the contractor’s share of gas, RNRL had told the apex court.