New Delhi: The petroleum ministry is confident that the gas sale and purchase agreements signed between Reliance Industries Ltd (RIL) and companies in sectors such as power, fertilizer and steel remain valid following the court ruling on RIL’s dispute with Reliance Natural Resources Ltd (RNRL).
The Bombay high court on Monday asked Mukesh Ambani-managed RIL to forge a “suitable arrangement” within a month to sell natural gas from the Krishna-Godavari (KG) basin at a price 44% lower than the government-stipulated price of $4.20 (around Rs200) per per million British thermal units (mBtu) to RNRL, headed by his estranged younger brother Anil Ambani.
The gas sale and purchase agreements, or GSPAs, between RIL and companies in key sectors still stand following the ruling, said a petroleum ministry official.
“Gas production and utilization will not be hit. Prima facie, there is no need for action on part of the government,” said the official, who did not want to be identified because of the sensitivity of the issue.
The court passed an interim order on 30 January, allowing gas to be sold to government-nominated buyers at $4.20 per mBtu. The court had then said the gas sale agreements should be entered into with the provision that they were subject to a final ruling.
Questions emailed to spokespersons for the two companies had not been answered by the time this edition went to the press.
Some of the companies that RIL has signed GSPAs with are Gautami Power Ltd, GVK Industries Ltd, Konaseema Gas Power Ltd, Lanco Kondapalli Power Ltd and Maharashtra State Power Generation Co. Ltd.
“We will not have any problem as RIL has plenty of gas. It is an internal matter between the two brothers over the price. RNRL does not have any use for gas now. We do not have any fears” over supplies, said G.V. Krishna Reddy, chairman and managing director, GVK Power.
Although the court ruling went in favour of RNRL, the Anil Ambani company still needs to set up power plants that can use the gas.
Supplies to other RIL customers “should not be impacted because RNRL does not have the offtake capacity today”, said Deepak Pareek, a Mumbai-based research analyst at Angel Broking Ltd. “Till the infrastructure is not ready, all the GSPAs are likely to continue. Once the infrastructure for RNRL is ready, the additional production capacity of 40 million standard cu. m per day (mscmd) will take care of the GSPAs.”
RIL began pumping natural gas from the D6 field off the eastern coast in April and the output will scale up to a peak of 80 mscmd by the end of the year. A separate case between state-owned NTPC Ltd and RIL has also to do with the price at which the latter will supply gas. NTPC claims the two companies agreed to a price of $2.34 per mBtu. RIL wants to sell at the $4.2 per mBtu price set by the government. The case will come up for hearing on Wednesday.
“We have always maintained that our stand is justified and with this court judgement our case has become stronger. There can’t be two different standards for similar cases in the same court,” said a senior NTPC executive, who did not want to be identified.