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Government’s $3 billion demand premature: Reliance Industries Ltd, Shell India

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Source: The Economic Times
Wednesday, July 19, 2017

 NEW DELHI: Reliance Industries Ltd (RIL) and Shell India have challenged the government decision to demand $3 billion from the contractors of Panna, Mukta and Tapti fields on the basis of an arbitration tribunal's ruling and asserted that the action is premature as the legal process has not been completed. 


RIL said the matter had not reached the “quantification stage” in the arbitration tribunal, which had given its "Final Partial Award" last October. 

Further, the matter is sub-judice as Reliance has already challenged the partial award in English courts, the company said in an emailed response to ET's queries. 

Shell India, which acquired BG's stake in the field, echoed RIL's view. "This matter remains subject to court and arbitration proceedings. Any view on the outcome of this arbitration is premature at this stage as further proceedings, including quantification, are still to be carried out," Shell India said. 

Shell and RIL hold 30 per cent each in the fields while the third partner, state-run ONGC that holds 40 per cent, is not involved in the arbitration or the current appeal. 
 
RIL shares fell 2 per cent in the Bombay Stock Exchange on Tuesday and the exchange sought a clarification from RIL about the ETreport on the development. 

ET reported on Tuesday that the government has demanded a total of $3 billion from RIL, Shell and ONGC, contractors of the fields, after the arbitration tribunal upheld its position in a dispute over "profit petroleum" that the government gets from the contractors, and the royalty payable. 

The government had asserted that its share of "Profit Petroleum" from the fields was heavily underestimated because the contractors calculated the profit after deducting tax at the rate of 50 per cent, while they actually paid only 33 per cent tax. 

The tribunal also upheld the government's position that marketing margins should have been included in the sales price, which would raise the royalty payable and profit petroleum. 

RIL said it had been notifed by the government "of its computation of the purported share of GoI's profit petroleum and royalty alleged to be payable by the contractors pursuant to GoI's interpretation of Arbitration Tribunal's Final Partial Award dated Oct 12". 

"Government's demand notice is premature. The quantification of liabilities (if any) of the parties arising out of the Partial Award have to be determined by the Arbitration Tribunal after the Parties have made their respective submissions on quantification. The Arbitration Tribunal is yet to schedule the timeline for the quantification phase," it said. 

RIL said it had responded to the government's demand. "Before the process of quantification can commence certain outstanding issues will have to be resolved. RIL has already responded to the Government's demand notice appropriately," the spokesperson said. 

The dispute over government share of profit petroleum and royalty from PMT fields has raged for nearly seven years. 
 


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