A long-running dispute over alleged cost inflation at the Reliance Industries’ KG-D6 block formally moved into full hearings this week, with proceedings beginning on Monday, November 3 at a central Delhi Taj property, according to people with direct knowledge. India’s Attorney General R Venkataramani is leading arguments for the Union government, while Harish Salve is appearing for the Reliance-led consortium (with BP and Niko). The AG is slated to close the government’s opening round today (Friday), after which the tribunal is expected to hear the contractor’s response early next week, the people said.
At stake, said multiple sources familiar with the preparations, is a potential financial exposure discussed by the parties of several billions of dollars. That figure, they cautioned, reflects a wide range of scenarios around disallowed cost-recovery, interest, and knock-on revenue-share effects—however, an official number could not be established.
In response to an email query in March 2025, the GoI had told BW Businessworld that "GOI's claim is related inter-alia to the cost of unproduced gas, excess amount spent on over-engineering, extra amount recovered on account of marketing margin, interest etc," GOI told BW in response to its email query. However, no response was received on the query about the amount it was seeking to recover from RIL."
An email query sent to GoI on Friday Nov 7, remained unanswered. Their response will be added to the story as and when received. RIL did not respond to an email query.
RIL Story
Sources close to RIL say the first KG-D6 arbitration was initiated by RIL in 2011 after production trailed plan, triggering disputes over cost recovery under the PSC (Production Shareing Contract).
They contend the consortium invested roughly $5 billion, and that had the originally envisaged gas volumes been produced, gross revenues could have been about $8 billion. Under the PSC’s structure, they stress, capital outlays are first recovered from revenues (“cost recovery”), following which the government’s take flows through royalty, taxes, and profit petroleum—all of which, they say, were duly paid on the gas actually produced.
The same sources argue the value of the field hinges on produced volumes and administered price, and that gas price assumptions couldn’t be retro-fitted to penalize recovery of bona fide, audited costs merely because output under-shot expectations. Their core principle: if $100 is invested, a substantial portion is legitimately recoverable before profit sharing kicks in; whatever was produced already yielded royalty/taxes/profit-petroleum to the State. They also maintain that RIL prevailed on key points in earlier proceedings, and that the company continues to contest any narrative of “gold-plating” that conflates production variance with inadmissible costs.
The week’s arc
- Mon–Thu: The government laid out its case that large tranches of KG-D6 development costs are inadmissible under the Production Sharing Contract (PSC) given the shortfall against approved output plans, and that “excess facilities/under-utilised capacity” should not burden the State’s profit petroleum.
- Fri (today): The Attorney General is expected to finish the opening submissions, including a walkthrough of audit trails, Management Committee minutes, and cost-recovery computations, before the tribunal sets the timetable for the respondents’ case, people present said.
- Next: The Reliance-BP-Niko side—led by Harish Salve—is likely to argue that the PSC permits cost recovery of duly incurred and audited expenditures regardless of production variance, and that “gold-plating” is a political label, not a PSC test, these people added.
Why it matters
The KG-D6 cost-recovery fight—popularly dubbed the “gold-plating” case—has simmered for over a decade. Under India’s PSC model, contractors first recover audited costs from field revenues and then share profits with the government. Disallowing costs can sharply raise the State’s take and lower the contractor’s. Public filings and reportage over the years have cited cumulative disallowances in the ~$2.3–2.8 billion band, with formal arbitration trudging through tribunal re-constitutions and court skirmishes.
Mind the other KG-D6 case
This week’s hearings are separate from the “migrated gas/ONGC” dispute—where a 2018 arbitral award that had favoured Reliance was set aside by the Delhi High Court on Feb 14, 2025, prompting a fresh $2.81 billion government demand and a Supreme Court appeal in May 2025. That matter turns on reservoir connectivity and is running on a different legal track.
The road ahead
Procedurally, once the government closes today, the tribunal is expected to: (1) lock the issues list around PSC interpretation, admissibility standards, and the audit/MC record; (2) schedule cross-examination of experts on reservoir, facilities sizing, and accounting treatment; and (3) receive post-hearing briefs on quantum models, according to the people cited above.
Reliance has consistently rejected the “gold-plating” charge, maintaining that the PSC does not permit hindsight-based cost disallowances merely because production undershot early projections.
Editor’s note: This report is based on on-site observations and conversations with individuals directly familiar with the closed-door proceedings. Specific venue and counsel roles have not been officially notified by the tribunal; financial magnitudes referenced reflect scenario ranges discussed by the parties and may not be formal claim amounts. |
