Government Demands ₹24,500 Crore from Reliance – What’s Next?

In a significant development, the Indian government has issued a demand notice of $2.81 billion (approximately ₹24,500 crore) to Reliance Industries Ltd (RIL) and its partners, BP Plc and NIKO (NECO) Ltd. This demand pertains to the alleged extraction and sale of natural gas that migrated from Oil and Natural Gas Corporation’s (ONGC) blocks to RIL’s KG-D6 field in the Krishna Godavari basin. ​

Background of the Reliance Dispute

The dispute dates back to 2013 when ONGC suspected that natural gas from its KG-DWN-98/2 (KG-D5) and G-4 blocks was migrating into RIL’s adjacent KG-D6 field. ONGC claimed that at least four wells drilled by RIL near the boundary were extracting its resources. In May 2013, ONGC filed a writ petition in the Delhi High Court seeking compensation for the alleged loss. ​

Arbitration and Legal Proceedings

Following the court’s direction, an independent panel investigated the claims, leading the government in 2016 to demand $1.55 billion from RIL and its partners for the alleged gas migration. RIL contested this claim before an arbitral tribunal, which, in July 2018, ruled in favor of the company, stating it was not liable for any compensation. The government challenged this arbitration ruling in the Delhi High Court, arguing that it contradicted public policy and favored the contractor unjustly. In May 2023, a single-judge bench upheld the arbitration award, dismissing the government’s appeal. However, in February 2025, a division bench of the Delhi High Court overturned the previous judgment, ruling against RIL and its partners. ​

Current Demand Notice

Consequent to the division bench’s judgment, the Ministry of Petroleum and Natural Gas issued a demand notice of $2.81 billion to RIL and its partners. This amount includes compensation for the gas allegedly extracted from ONGC’s reserves, additional profit petroleum due to disallowed costs after KG-D6’s output fell below target, and interest calculated at LIBOR plus 2 percent. ​

Reliance’s Response

RIL has received the demand notice and, based on legal advice, considers the division bench’s judgment and the provisional demand unsustainable. The company plans to challenge the judgment in the Supreme Court and does not anticipate any liability arising from this case.

Conclusion

The ongoing legal battle between the Indian government and RIL over the alleged gas migration underscores the complexities involved in resource extraction and ownership. As the case progresses to the Supreme Court, its outcome will have significant implications for the involved parties and the broader energy sector in India.

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