SC to decide imported LNG pricing issue on Aug 7

NEW DELHI: The Supreme Court will consider on Tuesday the issue of vacating a stay by the Gujarat High Court on a new government policy of uniform pooled price of imported regassified liquefied natural gas (RNLG).

The new policy has resulted in price differences in RNLG for the existing consumers such as Essar Steel and Gujarat State Petroleum Corporation and new consumers such as Ratnagiri Gas and Power, developer of Dabhol Power Plant.

A bench headed by Justice Ashok Bhan directed the matter to be taken up on Tuesday after Petronet LNG, the primary supplier of LNG, raised the plea during the mentioning period (meant for urgent matters).

Senior counsel Arun Jaitley, appearing for Petronet, submitted that it was moving an application for vacation of stay in view of the apex court's direction on August 1 to do so in case any of the high courts passed any interim order on the issue.

Earlier, the Gujarat High Court on a plea by existing customers such as GSPC, GSFC, GNFC and Gujarat Power Company had stayed the central government's notification directing IOC, GAIL and BPCL, Petronet's partners, to charge uniform prices from existing and new consumers.

The government in order to make fuel affordable to the Dabhol power plant had decided to raise the price of LNG imported by Petronet LNG from Qatar on two long-term contracts by averaging its price with the costlier LNG imported for the the new consumer Ratnagiri Gas and Power.

Petronet's long-term LNG import price of $2.53 per million British thermal unit (mBtu) was averaged with spot LNG, priced at about $8.5 per mBtu.

The apex court while refusing to stop the hearing of these cases had earlier issued notices to Centre and state-run firms IOC, BPCl, GAIL, Essar and Gujarat State Petroleum Corp (GSPC) on a request by Petronet, Indian Oil, and Bharat Petroleum for clubbing of a bunch of petitions challenging the government order of raising LNG price.

While Essar Steel had challenged the directive of averaging the long-term LNG price of Petronet in Delhi High Court, GSPC, GSFC, GNFC and Gujarat Power Company had challenged the order in Gujarat High Court.

Petronet and its PSU partners, IOC and BPCL, had contended before the Supreme Court that the validity of the Petroleum Ministry's letter dated March 6, 2007 on uniform pooled price of RLNG, which is to be decided by different courts, had the risk of leading to multiplicity of proceedings and conflict of decisions.

IOC, BPCL and GSPC had communicated to Essar about raising price of the three million standard cubic meters per day of gas supplied to its steel plants to $4.3272 per mbtu from $2.9412 per mbtu.

While seeking to restrain BPCL, IOC and Gail from giving effect to price increase from August 1, Essar had stated that the state-run companies had arbitrarily and illegally increased the price charged from it although the existing long-term contracts provided for a fixed price.

Challenging the decision to pool prices, Essar said the sudden increase in prices from the contracted price of $2.94 per mbtu to $4.3272 per mbtu was arbitrary.

IOC had already notified the price increase with effect from August 1 and GSPC and BPCL have also issued similar notices, the existing customer said, adding the ministry had overturned the pricing agreements between the marketing companies and their consumers.