Union petroleum secretary R.S. Pandey declined comment as the case is before the courts. A top petroleum ministry official who did not want to be identified said: “We are the owner of the gas and RIL is the operator. We have always maintained this. Our ministry along with the law ministry is working to protect the government of India’s interest.” This official said “just because our stand goes against Anil (Ambani’s), people perceive that we are in RIL’s favour.”
Analysts are unsure if the Supreme Court will value the sanctity of a corporate contract over an issue of national importance. The Supreme Court “typically having a broader perspective of cases, could consider the national significance of D-6 gas project, rather than focusing only on the terms of the RIL-RNRL gas sales agreement,” wrote Nilesh Banerjee, Durga Dath and Karthik Bhat, analysts for Goldman Sachs Group Inc. in a 17 June report.
The dispute is also complicated because of an independent but relevant lawsuit between RIL and public utility NTPC Ltd. NTPC and RIL are engaged in a legal battle in the Bombay high court over the terms of gas supply to fuel the expansion efforts at two NTPC plants at Kawas and Gandhar for 17 years at $2.34 per mBtu. While the nature of two lawsuits is different, NTPC’s terms of purchase will apply to RNRL—it was benchmarked so in the same family agreement.
NTPC, however, wants to keep its distance. A top executive from the state-run company, who did not want to be identified said: “This (RIL vs RNRL) is a very complicated case. However, the high court decision over gas supplies has no bearing on us.” The power ministry is pitching for NTPC against RIL, an effort that runs counter to the petroleum ministry’s stand.
RIL’s petition to the Supreme Court has challenged the Bombay high court’s ruling that asks it to supply gas to a firm without seeking government approval, asking if those directions had “the effect of setting aside the government policies” and saying that complying with it could lead to termination of its contract by the government.
RNRL, in its petition before the Supreme Court, says that the high court judgement “relates solely to RIL’s share of gas...and does not have any impact on the Government’s share of gas or of its rights and entitlements”, implying RIL should give it 28 mscmd at the lower price while paying the government its share that would arise from a sale price of $4.20 per mBtu.
The Supreme Court’s decision, when it is reached, will also affect the fertilizer and power firms that have been identified under the utilization policy. Several of these firms have also signed agreements with RIL. “We will not have any problem as RIL has plenty of gas. It is an internal matter between the two brothers over the price. ...We do not have any fears” over supplies, G.V. Krishna Reddy , chairman and managing director, GVK Power had earlier told Mint. U.S. Jha, chairman of Rashtriya Chemicals and Fertilizers Ltd, said the government had assured it of gas supplies. Over the past seven years, RIL has invested $5.5 billion and built a structure that is effectively a full-scale factory that works 500-2,000ft below sea level.
Graphics by Sandeep Bhatnagar / Mint
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