'Don’t ignore GSA arbitration clause!' PNGRB
Fourteen years after first complaining, the Dibrugarh-based Ratna tea factory has received a clear answer from the PNGRB in its dispute with Assam Gas: don't ignore the arbitration clause in a Gas Supply Agreement (GSA).
In a landmark 12-page PNGRB order on April 19 (2023), the PNGRB dismissed a complaint filed by Ratna against Assam Gas, Oil India and the oil ministry on June 4 (2021). "On examination, we found that Ratna is trying to wriggle out of the arbitration clause in the draft GSA it signed with Assam Gas (in 1998)," says the order signed by members Gajendra Singh, AK Tiwari and AK Pande.
"The Board holds that the complaint merits dismissal." The ruling adds: "The Board has no jurisdiction to adjudicate the disputes involving arbitration clause in the agreement."
It reads further: "The arbitration mechanism should be preferred at the first instance to resolve the dispute between the parties, as it is an expedient mode of dispute resolution mechanism." Since 2009, Ratna has accused Assam Gas of misusing its dominant position to impose non-APM (non-subsidised) gas prices and of not allowing consumers to revise the amount of gas booked while unilaterally charging a transportation tariff.
Sadarmal Bagaria Industries (Pvt Ltd) set up the Ratna tea factory in 1998 to process and manufacture tea. The same year, Ratna approached Assam Gas for 150,000 cubic metres of piped gas every year.
But Ratna and Assam signed a gas supply agreement for only 70,400 cm/year on March 21 (1998) at APM rates applicable for the tea industry. The agreement specified that if Ratna needed more gas, Assam Gas would supply the increase at APM rates.
Ratna's yearly gas consumption was always above the booked 70,400 cubic metres, and Assam Gas used to charge accordingly at APM rates. Trouble began when the 10-year GSA ran out on May 20 (2008).
Assam Gas issued a letter on June 2 (2008) proposing a new agreement under which gas drawn above the booked quantity would be at non-APM and market-driven prices. Ratna vociferously protested, describing the terms as "arbitrary and onerous" and arguing it was an old customer.