Reliance Industries and the Petroleum Ministry are headed for a battle.
On Wednesday, the Ministry served a notice to RIL disallowing $1.25 billion as cost recoveries for 2010-11 and 2011-12 in the East Coast gas fields. It held RIL responsible for violation of its committed work programme under the production sharing contract.
Last November, RIL had sent an arbitration notice to the Ministry on the latter's intent to disallow some of the expenditure incurred by the company in the gas fields. Following this, the Ministry had asked RIL to withdraw it on the grounds that the matter was premature. The Government had also denied that there was any dispute.
To pre-empt any such move by the Government, RIL had recently approached the Supreme Court to appoint an arbitrator. Reliance had sent an arbitration notice on the grounds that the move to recoup the expenditure is illegal as it is against the production sharing contract.
Now, with the Government serving a notice, the dispute is out in the open, sources said.
The letter spells out that RIL till now has spent $5.693 billion on the development of D-1 and D-3 gas fields in the block. Of this, about $4.574 billion has been incurred on production facilities alone. The Ministry said that up to March 31, 2011, the operator (RIL) has recovered approximately $5.258 billion from the operations in D-1 and D-3.