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KG gas row enters last lap in court

KG gas row enters last lap in court
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First Published: Sat, Jul 18 2009. 12 09 AM IST

Intervenor status? Petroleum minister Murli Deora. Pankaj Nangia / Bloomberg
Intervenor status? Petroleum minister Murli Deora. Pankaj Nangia / Bloomberg
Updated: Sat, Jul 18 2009. 12 09 AM IST
New Delhi/Mumbai: Ahead of the crucial hearing in the Supreme Court on 20 July, the legal spat between the rival Ambani brothers turned both ugly and curious after Mukesh Ambani-controlled Reliance Industries Ltd (RIL) and the Union government filed two separate affidavits on Friday.
The RIL affidavit not only challenged the demand of Anil Ambani-controlled Reliance Natural Resources Ltd (RNRL) for gas supplies, but also levelled serious allegations. The government’s affidavit maintained that the gas belongs to it and asked the court to make it an intervenor in the case.
Intervenor status? Petroleum minister Murli Deora. Pankaj Nangia / Bloomberg
According to RIL’s affidavit, RNRL’s claim violates the government’s gas utilization policy and would hence impact the supplies to power and fertilizer projects mandated by the government.
While RNRL has sought the apex court’s intervention in a special leave petition for immediate supply of 28 million standard cu. m of gas a day (mscmd) at $2.34 per million British thermal unit (mBtu) for a period of 17 years, and restriction of 40 mscmd supply to any other company, RIL in its affidavit has opposed grant of interim relief sought by RNRL. RNRL’s price is 44% lower than the government-specified price.
At the same time, the government has introduced a new legal angle with its affidavit, challenging the RIL-RNRL agreement and claiming that it had rejected the price of $2.34 per mBtu sought by RIL on the grounds that it was not an arms length transaction.
“That the RIL and RNRL cannot settle between themselves as to how the gas which is a national asset and a natural resource, which vests in the Government of India... It is not the private property of the RIL and RNRL and any understanding arrived at between them is not binding upon the government,” said the filing.
According to a person who is part of the government’s legal team but did not wish to be identified, the government’s affidavit is a reiteration of its stand in the Bombay high court.
“The government is the owner, gas being a natural resource. It has every right to regulate the distribution in terms of the production sharing contract and also in accordance with the decision of (the) empowered group of ministers. No private arrangement or MoU (memorandum of understanding) which seeks to divide gas, can prevent the government policy and they are invalid,” this person said.
The government’s affidavit has also said that RIL needs its approval to “sell all gas at approved and at a uniform price for all users across all sectors”, adding that the high court order “has the effect of completely undermining” the gas utilization as well as its pricing policy.
“Any order contrary to the public policies will be against the national and public interest”, the filing says, besides “interfering with the sovereign rights” of the government.
Union petroleum minister Murli Deora said that he stood by his earlier statement about gas being the sovereign property of the government.
“The price as well as the priority for gas allocation has been fixed by the government,” Deora told Mint.
RIL and RNRL had approached the Supreme Court against the verdict of the Bombay high court on 15 June, which had asked RIL and RNRL to sign a “suitable arrangement” for supply of gas.
The Supreme Court refused to stay the lower court’s ruling. The law suit is an extension of an almost three-year-old dispute over the output from RIL’s D6 block of Krishna-Godavari basin, off the eastern coast of India.
Mint had reported on 19 June about the Bombay high court judgement quoting the secret memorandum of understanding (MoU) between Mukesh and Anil Ambani, signed in 2005 when the two parted ways, suggesting that the Reliance-Anil Dhirubhai Ambani Group (R-Adag) will have a first right of refusal on all future gas discoveries by RIL, though at market prices.
“As per the MoU, the supply of gas was subject to availability and approval by the Government,” RIL stated in its affidavit.
In a letter dated 30 June to the union minister for fertilizer M.K.Azhagiri, RNRL had tried to ease these concerns saying KG gas production will increase from 80 mscmd to 120 mmscmd and that will be enough to meet all its demands and “hence, it is unlikely that the judgement would affect the gas supply to fertilizer companies...even while meeting the RNRL requirement.”
In its affidavit, RIL has also raised the issue of Foreign Exchange Management Act, or Fema, violation on the part of Adag’s Reliance Energy Ltd (REL).
“REL actually raised finances in the form of external commercial borrowings to (the) extent of USD 360 million for the Dadri power project and thereafter having utilized the proceeds in contravention of the prevailing FEMA regulation, is facing penal proceedings,” the affidavit stated.
Questions emailed to RIL and R-Adag spokespersons remained unanswered till the time of filing this story.
RIL also told the Supreme Court that RNRL did not have any plants capable of receiving the fuel and any damages suffered by RNRL, if established, can be recompensated later.
PTI contributed to this story.
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First Published: Sat, Jul 18 2009. 12 09 AM IST
More Topics: RIL | RNRL | Reliance | Gas row | KG D6 |