Mumbai: The Bombay high court has temporarily allowed Reliance Industries Ltd (RIL) to sell gas from its fields in Krishna-Godavari basin off India’s east coast, pending judgement in its lawsuit with Reliance Natural Resources Ltd (RNRL).
\A two-member bench of justices J.N. Patel and K.K. Tated in an interim order on Friday lifted an October 2007 ban on RIL on the sale of natural gas from its D-5 block, paving the way for it to sew up deals with buyers at a government-stipulated price of $4.2 (about Rs250) per million British thermal unit (mBtu).
At odds: A file photo of Anil Ambani (left) and Mukesh Ambani, who have been in a tussle over the Krishna-Godavari basin gas reserves. Arko Datta / Reuters
Mukesh Ambani-controlled RIL and RNRL, headed by estranged younger brother Anil Ambani, are contesting details in a supply contract that was agreed upon when the Reliance group spilt in 2005.
A judgement on the three-year-old lawsuit—the closing arguments of which was also heard on Friday—is expected by March.
The company can now start production around 15 February, as it has earlier said. RIL has entered into agreements with nine electricity and fertilizer companies last year, on which it can now move ahead, subject to the final judgement.
Analysts tracking the litigation were divided on the significance of Friday’s order.
An analyst with a foreign brokerage, who didn’t want to be named, said the verdict “removes uncertainty and paves way for gas sale”. This, he said, would let the country benefit from a national resource.
“Revenue upside will be significant for RIL if the final order goes their way as well, but they might start full-scale commercial operations from April this year,” he said, explaining that starting production in April would give RIL tax benefits for seven full financial years instead of just a few months for the first year if they start earlier. The firm follows an April to March fiscal year.
However, Deepak Pareek, a sector analyst with Mumbai-based brokerage Angel Broking Ltd, said the interim order had only limited positives for RIL. “The interim order is only for one-and-a-half months and will not add much to RIL’s financials in this period,” he said. “The thing to watch out for is when the company actually starts gas production.” Pareek has a “buy” rating on RIL, with a target price of Rs1,440.
To be sure, RNRL senior counsel Mukul Rohatgi refused to see the development as a setback. “Our stand was to let the government and government nominees get the gas. Our rights are still protected. This is not a disappointment,” he said after the order was passed.
An RNRL official, who spoke on condition of anonymity, said that the actual effect of the interim order would be insignificant since there would only be a lag of a few weeks between actual supply of gas in mid-February and the final order expected in mid-March.
The Bench, in its interim order, endorsed the so-called minutes of order proposed by the government—a legal practice of asking one of the parties to suggest in a draft order the stance they want the court to take—that said the ban should be lifted and that gas should be sold at $4.2 mBtu to so-called priority sectors.
The government was an intervener in the lawsuit because it is the ultimate owner of natural resources in the country.
Justice Patel said this interim order doesn’t in any way affect the rights and claims of the parties in the lawsuit and those in another litigation, also being fought at the Bombay high court, between RIL and NTPC Ltd, India’s biggest producer of electricity, over clauses in a separate contract.
The final order will decide whether RNRL wins its claim to 28 million standard cu. m of gas a day for 17 years at $2.34 mBtu—a price that is 45% lower than the government-fixed price.
Reuters contributed to this story