New Delhi / Mumbai: The legal battle on gas supply between Reliance Industries Ltd (RIL) and Reliance Natural Resources Ltd (RNRL) in the Bombay high court took a dramatic and unexpected turn on Thursday when the government, which has intervened in the dispute, made a claim that significantly weakens the position of state-run power generator NTPC Ltd which is fighting a separate case with RIL on the same issue.
The government’s lawyer, T. S. Doabia, said that NTPC had no “concluded” deal with RIL. While that weakens RNRL’s case, it does the same to NTPC’s case against RIL too.
NTPC’s case with RIL, being fought in the Bombay high court too, dates back to December 2005 and involves the supply of 12 million standard cu.m of gas per day (mscmd) to NTPC for 17 years.
NTPC has always claimed that it has a “concluded” contract with RIL on the supply of this gas from the latter’s blocks in the Krishna-Godavari basin and meant for two NTPC plants in Gujarat.
RNRL’s case with RIL dates back to November 2006 and the former has claimed that it has rights, courtesy an agreement signed when the Reliance group’s assets were split between estranged brothers Mukesh Ambani and Anil Ambani, to 28mscmd of gas from the latter’s Krishna-Godavari basin blocks and also an additional 12mscmd if RIL’s agreement with NTPC breaks down, both at the same price at which RIL had agreed to supply gas to the state-owned power generator—$2.34 a million British thermal unit, or mBtu.
RIL wants to supply the initial 40mscmd of gas from the blocks to buyers other than NTPC and RNRL.
The government lawyer’s declaration was criticized by a minister in the ruling United Progressive Alliance government who said it would “create a big stink”. The minister did not want to be named.
Meanwhile, senior executives at NTPC, who did not wish to be named, said the government’s claim in court would not weaken their company’s case against RIL.
“We will get gas for our Gujarat projects whenever RIL honours its commitment. NTPC is a commercial organization. As far as we are concerned we have got a strong case. We will continue the fight. We will not settle the dispute out of court,” said one of the executives.
Lawyers for RNRL protested the government lawyer’s claim.
“What happens to your suit against RIL? NTPC has been arguing all along that it has a concluded contract with RIL. With this statement, NTPC has no case at all,” said Mukul Rohatgi, one of the lawyers.
Another noted lawyer Ram Jethmalani said the government could not say one thing in a case and something else in another. “This shows your government is corrupt.”
Spokespersons for RIL and Reliance Anil Dhirubhai Ambani Group declined comment.
The stakes in both cases are high.
Prices of gas have increased significantly since 2004, when the disputed contract between NTPC and RIL was negotiated.
Currently, gas in the spot market is available at $20 (Rs872) a mBtu and there is no gas available through long-term supply agreements (at least till new supplies come online).
On Thursday, Rohatgi also told the court that RNRL was willing to share half the exploration costs of pumping gas from the Krishna-Godavari basin with RIL.
Rohatgi, however, urged the court to allow RNRL to sell the gas it would receive from RIL for a period of three years, until its own power plants were fully operational.
The court, after suggesting that Mukesh Ambani and Anil Ambani approach their mother Kokilaben to resolve the dispute, has adjourned the case to 1 September.
Mint’s Bhuma Shrivastava contributed to this story.