In an embarrassing move for the government, the Supreme Court has asked Petroleum Minister Veerappa Moily to explain why Mukesh Ambani's Reliance Industries Ltd should be paid more to produce gas from the KG basin off the east coast.
Reliance operates India's largest offshore gas field and was expected to deliver a quarter of the country's gas supply, but has struggled with a slump in production over the past two years.
The Supreme Court has given the minister and RIL four weeks to respond. The next hearing is scheduled for September 6.
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The judges noted that the case against the price revision has been brought to its attention by "a senior member of Parliament," Gurudas Dasgupta of the Left.
Mr Dasgupta has alleged that the minister is petitioning the government to pay more for gas production to allow windfall gains to Mr Ambani's company, a claim refuted by Mr Moily. A few days ago, the minister suggested that prices be doubled starting April 2014.
Mr Moily has said that incentivizing gas production will help reduce India's vast dependency on oil imports.
Mr Dasgupta wants Reliance to return 85 per cent of the KG-D6 basin to the government for non-performance. He also wants the government to fine the company Rs 100 crore for not meeting production targets.
In 2011, the Comptroller and Auditor General (CAG) criticised Reliance Industries and the government over development of the country's key natural gas field in the Krishna Godavari (KG) basin and said profit-sharing agreements must be revamped.
The report also said Reliance was allowed to enter the second and third exploration phases of its blocks without giving up 25 per cent of the contract area at the end of each phase, as required, by instead treating the entire area as a discovery area.
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