The gas utilization policy forms the basis on which the government has prioritized allotment of gas, with existing fertilizer units ranking first, followed by existing power, petrochemical and city gas projects. RNRL wants the gas for its greenfield 7,840 megawatt Dadri plant, which is yet to be set up and which will likely figure very low on the government policy.
An analyst tracking the firms for a Mumbai-based brokerage and who does not want to be identified terms the dispute “a royal mess”, one that makes him “constantly do and redo my math all the time”.
On 15 June, even after the Bombay high court passed its ruling, analysts were predicting appeals to the Supreme Court and were working out possible scenarios on who would win the last round.
The high court had ruled in favour of RNRL asking both the companies to sign a “suitable arrangement” that was in keeping with the so-called family pact, or turn to their mother Kokilaben Ambani for arbitration, or go to the company court to amend the scheme of demerger under which the Reliance empire was carved up between the two brothers.
Several experts ruled out the possibility of a reconciliation. And Union minister for petroleum and natural gas Murli Deora was quoted by Indian news channels as saying that he had met the two brothers, and tried to persuade them to arrive at a settlement but to no avail.
“RNRL is seeking immediate supply of gas to protect its own interest. This situation has arisen because of RIL’s continuous failure to enter into a proper agreement,” said RNRL’s counsel Mahesh Agarwal.
RNRL wants to sell the gas it is given by RIL until its power plant comes up, and claims that under the terms of the demerger, the gas supply business had been transferred to the Anil Ambani company. The high court ruling, however, quotes the family pact and says RNRL cannot trade in gas.
RIL, in its recent petition in the Supreme Court, has questioned if “a private memorandum of understanding/family arrangement amongst the members of the promoter family” which has not been approved by board of directors, shareholders or the court, should be interpreted at all as being binding.
RNRL, for its part, was the first to appeal the Supreme Court because it wants the court to arrive at a final decision instead of broadly upholding the pricing and suggesting alternatives to reach a settlement like the Bombay high court has.
Meanwhile, the government isn’t amused by efforts to cut up a national asset according to a private family arrangement. A party to the gas dispute now, its stance will be revealed once hearings begin in the Supreme Court and will be very crucial—maybe, even central—to the outcome.
The importance of the gas in dispute can be gauged from a 24 March report from Goldman Sachs Group Inc. that said that besides doubling domestic gas production, supply from the KG-D6 block will likely “lead to reduction in the oil import bill by $8-13 billion, add $2.5-4.5 billion annually to the exchequer (and) lead to cost savings of $2-$4.8 billion across various industries between 2010-11 and 2013-14”.