New Delhi, Nov 18 (IANS) The oil ministry argued in the Supreme Court Wednesday that the government would face a heavy burden if natural gas was supplied to Reliance Natural Resources Ltd (RNRL) by Reliance Industries Ltd (RIL) based on a family pact.

'The private arrangement envisages distribution of natural gas among the two parties for present and future reserves in the Krishna-Godavari basin as well as new discoveries in perpetuity,' said Additional Solicitor General Vivek Tankha.

'This will deny the use of this vital resource to the public at large,' Tankha, who is appearing for the oil ministry, argued before the three-judge bench of Chief Justice K.G. Balakrishnan, Justice B. Sudershan Reddy and Justice P. Sathasivam.

'This would keep a huge investment of around Rs.75,000 crore idle and increase the government's burden through import of fertilisers and liquefied petroleum gas,' the counsel said, referring to the investments in the Krishna-Godavari fields.

Earlier, Additional Solicitor General Mohan Parasaran said the government's production-sharing contract with the Mukesh Ambani-led RIL bars the company from entering into any private arrangement to supply gas.

'The government has exclusive rights over all minerals underlying the ocean and in the country's territorial waters,' Parasaran, also appearing before the court for the oil ministry, told the three-member bench.

'As per the production-sharing contract, the ownership of the gas cannot be passed on to RIL,' he said, adding that the gas also cannot be reserved for any particular party in fixed quantities and tenure.

The court is hearing the dispute over the supply of 28 million units of gas for 17 years at $2.34 per unit to Anil Ambani-led RNRL from the gas fields off the Andhra Pradesh coast, awarded to RIL.

The price, tenure and quantity were based on a family re-organisation pact of 2005, but RIL subsequently said it could only sell the gas for $4.20 per unit, as this was the price, the company claimed, fixed by the government.

RNRL counsel Ram Jethmalani has already opposed the oil ministry's plea to join the gas dispute as a party. He has also said if the oil ministry is granted its request, cross-examination of its officials must also be allowed.

Elaborating on the gas utilisation policy evolved by an empowered group of ministers, Parasaran said only the existing and operational power and fertiliser plants are to be given priority in supplies.

'The Dadri plant of RNRL is neither installed nor functional,' the oil ministry counsel said, referring to the Anil Ambani group's unit in Uttar Pradesh that is to get the supplies as per the family pact.

'The government will allocate gas to Dadri power plant subject to availability of the natural gas and it would be treated on the same footing as other similar plants under similar circumstances,' Parasaran said.

'Gas is a scarce commodity. It has to be given to as many plants as possible.'

According to the oil ministry counsel, RIL is supposed to supply gas to customers at a uniform arm's length price, fixed on the basis of the formula evolved by the government that takes global prices into account.

In July 2006, the oil ministry had rejected RIL's pact with RNRL, he said, adding the Bombay High Court's ruling in favour of RNRL overrides the government's executive authority.

The oil ministry is to conclude its argument Thursday.