Mumbai / New Delhi: The final chapter of one of India’s most closely tracked corporate lawsuits began on Tuesday, with the country’s apex court stepping in to untangle an almost three-year-old dispute over the output from a prolific natural gas basin.
The Supreme Court responding to petitions filed against a Bombay high court verdict last month, refused to stay the lower court’s ruling in a dispute that involves two of India’s biggest business conglomerates and the government, and affects the country’s largest power producer.
It doesn’t help that the two business houses are owned by estranged brothers—Mukesh Ambani and Anil Ambani—or that the government doesn’t exactly have one view on the issue with the ministries for petroleum and natural gas, fertilizers and power pitching for companies in their respective sectors. And it certainly doesn’t help that the business plans of at least two dozen fertilizer and power companies hinge on how seriously the court takes their status as government-nominated, priority, gas-starved buyers.
The government is the owner of the gas, profit from the sale of which it will share with the producer and operator of the oil and gas block according to terms of a production sharing contract, or PSC.
The apex court has asked both Reliance Industries Ltd, or RIL, controlled by Mukesh Ambani and Reliance Natural Resources Ltd, or RNRL, controlled by his brother Anil Ambani, to reply to the appeals filed by the other by 20 July, when the court will hear the matter again.
Significantly, both companies had opposed the Bombay high court ruling and filed their petitions last week.
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At the crux of this legal tug-of-war is gas, a scarce fuel that can fire power plants, fertilizer units, petrochemicals, automobiles and household cooking and heating, at a much lower price than heavier liquid fuels. It also happens to be cleaner. RIL struck a big gas reserve in the D6 block of Krishna-Godavari basin, off the eastern coast of India in 2002—the biggest gas strike in the world that year—and began production of gas in early April this year. At its peak, RIL can produce 80 million standard cubic metres of gas a day (mscmd) though it currently produces 28-30 mscmd.
RNRL, based on an agreement between the brothers Ambani signed in 2005 that ended at least eight months of public sparring by the brothers over control of the Reliance empire, claims it has rights to 28 mscmd of gas for 17 years at a price of $2.34 per million British thermal unit (mBtu).
RIL contests this claim and says it cannot supply gas at a price other than the government-set price of $4.2 per mBtu and to buyers other than those specified in the gas utilization policy.