In the arbitration notice, RIL stated that the move to limit the amount of expenditure the company can recoup from its flagging KG-D6 fields is illegal and outside the Production Sharing Contract
New Delhi: Reliance Industries (RIL) has sent an arbitration notice to the oil ministry over the move to disallow some of the expenditure the Mukesh Ambani-led firm has made in the KG-D6 gas fields as punishment for falling output, reports PTI.
In the arbitration notice, RIL stated that the move to limit the amount of expenditure the company can recoup from its flagging KG-D6 fields is illegal and outside the Production Sharing Contract (PSC), sources privy to the development said.
The ministry was moving toward restricting cost-recovery—now at 100%—in proportion to gas output from the KG-D6 fields. Its top officials and the upstream regulator, the Directorate General of Hydrocarbons (DGH), were discussing the amount they should disallow as expenditure and a notice was to be set to RIL soon.
However, before the notice could be sent, RIL has initiated arbitration proceeding, sources said.
The notice asks the oil ministry to appoint arbitrators to decide on the issue.
Reliance has built facilities to handle 80 million metric standard cubic metres per day (mmscmd) of gas production, but the fields are producing just about 41 mmscmd due to a fall in pressure and water ingress.
The PSC allow operators to recover 100% of their exploration and production costs and do not link cost-recovery to output.
Reliance had envisaged a gas output of 80 mmscmd by 2012 from an investment of $8.8 billion. However, current output is about half of the target and RIL has so far invested only $5.8 billion.
The oil ministry wants to “disallow expenditure incurred in constructing production/processing facilities at the Dhirubhai-1 and 3 gas (D1 & D3) fields in the KG-D6 block that are currently under-utilised/have excess capacity because of falling output”.
Sources said three arbitrators are to be appointed to decide on the issue. The oil ministry and RIL would suggest the names of one arbitrator each, while there would also be a third judge appointed.
Falling pressure and water incursion have brought down output from the D-1 and D-3 fields in the Bay of Bengal from 54 mmscmd in March, 2010, to 34.14 mmscmd now, as opposed to the targeted 61.88 mmscmd. A further 6.92 mmscmd comes from the MA oilfield in the same licence area.
Moves were afoot to call an all- party meeting tomorrow in a bid to break the deadlock over the issue which saw Congress ally Trinamool Congress joining the united opposition in demanding cancellation of the Cabinet decision on allowing FDI in retail
New Delhi: With the political opposition over foreign direct investment (FDI) in retail gathering momentum, prime minister Manmohan Singh today held consultations with Congress president Sonia Gandhi and is likely to call an all-party meeting tomorrow to resolve the deadlock in Parliament, reports PTI.
Mr Singh held consultations with Ms Gandhi soon after the Lok Sabha and the Rajya Sabha adjourned for the second day on the FDI issue.
Ms Gandhi’s meeting with the prime minister assumes significance as she is also the United Progressive Alliance (UPA) chairperson and key alliance partners Trinamool Congress and DMK have demanded rollback of the Union Cabinet decision allowing FDI in retail.
It also wants consultations within the UPA before taking major policy decisions.
DMK has termed the decision as ‘dangerous’ and demanded that the decision be withdrawn forthwith.
Party chief M Karunanidhi said, “The Centre’s insistence that states should go by the decision cannot be justified. DMK had opposed FDI in retail trade even when the idea was originally mooted.”
Government sources said moves were afoot to call an all- party meeting tomorrow in a bid to break the deadlock over the issue which saw Congress ally Trinamool Congress joining the united opposition in demanding cancellation of the Cabinet decision on allowing FDI in retail.
The BJP-led NDA (National Democratic Alliance) has already declared that it would not allow Parliament to function till government withdraws the decision on FDI in retail.
The BJP and the Left parties were among several who had given adjournment motion notices in Lok Sabha today.
The apex court also directed both Sahara India Real Estate and Sahara Housing Investment to file a detailed affidavit explaining how they will protect the interests of about 2.3 crore investors who had invested about Rs17,400 crore
The Supreme Court on Monday stayed an order issued by the Securities Appellate Tribunal (SAT) directing two companies from the Sahara group to refund about Rs17,400 crore to their investors.
A bench headed by Chief Justice SH Kapadia directed both the companies to file a detailed affidavit explaining how they will protect the interests of about 2.3 crore investors who had invested their money in these companies. The bench said the affidavit would also show how the firms are to secure liabilities that they have undertaken and protect the investors.
The apex court also asked both Sahara India Real Estate Corp (now known as Sahara Commodity Services Corp Ltd) and Sahara Housing Investment Corp to file their balance sheet for FY11 and statement of accounts for November 2011 by 8th January.
"Net worth of the companies particularly assets against which liability has been created, financial statements including balance sheets of 2010-11 and statements of accounts of the companies of November 2011 shall be mentioned in the affidavit," the bench said.
Earlier in June, market regulator, Securities and Exchange Board of India (SEBI) had asked both Sahara India Real Estate and Sahara Housing Investment to return money collected from about 2.3 crore investors through Optionally fully Convertible Debentures (OFCDs).
The two Sahara group companies and its promoters Subrata Roy Sahara and directors - Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary, then approached the Securities Appellate Tribunal (SAT). However, on 18th October, the SAT asked both the companies to refund Rs24,029 crore, including interest to around 2.96 crore investors who had subscribed to the OFCDs, within six weeks.
The group then challenged orders issues by both SEBI and SAT in the Supreme Court. While asking the two Sahara group companies to file an affidavit, the apex court also issued notices to the Union government and SEBI seeking their responses to the plea.
The Supreme Court also extended the deadline set by SAT in its order to 8th January, the next day of hearing in the case.
Sahara Real Estate floated an issue of OFCDs and started collecting subscriptions from investors from 25 April 2008 up to 13 April 2011. During this period, the company claimed to have collected over Rs19,400 crore, while up to 31 August 2011, the company had a total collection of over Rs17,656 crore. The amount was collected from over two crore investors. But the surprise was that Sahara claimed that it was not a 'public' issue as the OFCDs were offered to only its workers and persons associated with the Sahara group.
When this information came to the notice of the capital market regulator, it started its investigation and passed an ex-parte order on 24 November 2010 restraining the company from mobilising funds under a red herring prospectus (RHP). The order was treated as a show-cause notice and proceedings were initiated against both the Sahara companies.
Feeling aggrieved, the company filed a writ petition before the Bombay High Court, which stayed SEBI's order. The market watchdog then challenged the High Court order before the Supreme Court. In the meantime, SEBI passed an order dated 23 June 2011 that was placed before the Supreme Court, which asked both the Sahara companies to withdraw their writ petitions from the Bombay High Court with a direction to appeal before the SAT.