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RIL Vs RNRL | Deora tries to clear the air over gas

RIL Vs RNRL | Deora tries to clear the air over gas
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First Published: Tue, Aug 04 2009. 12 39 AM IST

Playing safe: Minister for petroleum and natural gas Murli Deora. Pankaj Nangia / Bloomberg
Playing safe: Minister for petroleum and natural gas Murli Deora. Pankaj Nangia / Bloomberg
Updated: Tue, Aug 04 2009. 12 39 AM IST
Mumbai: The gas dispute between the estranged Ambani brothers moved to a new stage on Monday—Parliament.
Accusations still flew thick and fast in the Lok Sabha and at an afternoon media conference call by Anil Ambani, but there were some early signs that the government and the younger Ambani had softened their stances.
Playing safe: Minister for petroleum and natural gas Murli Deora. Pankaj Nangia / Bloomberg
Union minister for petroleum and natural gas Murli Deora said in the Lok Sabha that the government has nothing to do with a “private dispute between two industries or industrialists” and would do its best to protect government and public interest in gas distribution policy.
This is in contrast to a petition filed earlier in the courts that a private memorandum of understanding between the two Ambanis that is the epicentre of the gas dispute should be scrapped.
On his part, Anil Ambani said he “welcomed” the ministry’s stance to consider allocating gas to a proposed power plant at Dadri in Uttar Pradesh that is being set up by one of the companies he controls, even as he fired fresh salvos aimed at Reliance Industries Ltd (RIL), run by his elder brother Mukesh Ambani. Last week, he had launched a bare-knuckled attack on Deora at the annual shareholders meeting of Reliance Natural Resources Ltd (RNRL), openly accusing the minister of favouring RIL.
RNRL is to buy the gas and sell it to the Dadri power plant.
Anil Ambani asked for “an objective and independent probe” by government agencies into the Rs45,000 crore capital expenditure programme that RIL has drawn up and got approved for developing the gas-rich D6 block of Krishna-Godavari basin, off the eastern coast of India. Such “gold plating” of capital costs, if indeed a reality, could benefit RIL in its revenue sharing deal with the Indian government, which owns the gas field.
The younger Ambani also called upon state agencies such as the Central Vigilance Commission and the Comptroller and Auditor General to look into “exorbitant” transportation rates being charged by Reliance Gas Transportation Infrastructure Ltd, a private firm owned by Mukesh Ambani, raising the price of gas further “when global gas prices have declined by as much as 80%”.
There were no official reaction from RIL.
These developments pertain to a three-year-old gas dispute between RIL and RNRL in which the latter is claiming rights to 28 million standard cu. m of gas a day (mscmd) for 17 years at $2.34 per million British thermal unit (mBtu), quoting a 2005 family pact that formed the basis of splitting the Reliance businesses. This is 44% cheaper than the government-mandated price of $4.2 per mBtu. RIL is contesting this claim saying it cannot give the gas to anyone at any price without government approval—a stance seconded by the petroleum ministry. The Supreme Court will hear the case on 1 September.
Attempting to clear the air for the first time since the dispute escalated to the Supreme Court, Deora also said the government had not discriminated against power plants in Uttar Pradesh, as alleged by some Samajwadi Party parliamentarians.
The Lok Sabha was adjourned twice over the gas allocation issue.
In a formal six-page response on Monday, placed before the lower House of Parliament, Deora countered each of the allegations that had been raked up in the legislature or outside it against the ministry—in a move that could indicate the government may finally be ironing out differences within its ranks.
Defending his ministry’s decision to file a petition impleading itself into the RIL-RNRL case, as both parties went in appeal against the Bombay high court decision in mid-June this year, Deora said the lower court’s verdict has “implications on the government’s rights” over stipulating use of gas as well as the future gas utilization.
The high court ruling had asked RIL and RNRL to formulate a suitable agreement honouring the 2005 family pact, which promised 28 mscmd of gas to RNRL and the first right of refusal to the Reliance-Anil Dhirubhai Ambani Group for 40% gas from all gas finds by RIL in the future, too.
Deora cited this as one of the reasons why the government had to necessarily intervene in the lawsuit. The ministry will file an amended petition later this week, said a member of the government’s legal team, no longer asking for the family pact to be quashed, as it was demanding before, but stick to protecting its rights.
Government is not the only one to have blunted its attack in this increasingly entangled battle.
Anil Ambani told journalists that his firm had brought this privilege to government’s notice three years back and that this right of first refusal was “purely an option to be decided based on prevailing (gas) price at a relevant time in future”.
Listing out all the existing fertilizer and power projects to have been allocated gas till date, Deora said five plants in Uttar Pradesh had received gas out of the total list of 15 power sector allottees, and that while neither NTPC Ltd nor RNRL were being discriminated against, the “first priority will be for existing plants which are not operating at all or are operating sub-optimally” because of a gas shortage.
NTPC and RIL are also in a dispute over the terms and validity of the gas supply agreement of 12 mscmd at same price as RNRL, in the Bombay high court. NTPC’s existing plants have been allocated 2.67 mscmd of gas.
“We will allocate gas to Dadri project subject to availability and....will be treated on the same footing as other similar plants under similar circumstances”, said Deora, sidestepping the minefield that his ministry was edging out RNRL’s claims, but added “this plant is neither installed nor functional”.
Anil Ambani placed the blame for the Dadri project still being on paper squarely on RIL, saying it refused to give them a bankable agreement that made it impossible to raise funds. Quoting a June 2009 report by the petroleum ministry that said RIL could produce peak output of 80 mscmd, Ambani said, “Why then is RIL producing less? Production is being artificially kept low” to cater to the slow offtake because of its higher delivered price, leading to “hoarding of gas by a monopolistic producer like RIL” in order to increase its realizations, he alleged.
On 31 July, Anil Ambani had written a letter to Union power minister Sushil Kumar Shinde, assuring him that his group will “extend all possible cooperation to NTPC that may be required to protect its interests”, in a possible attempt to diffuse any opposition the power ministry may have to RNRL’s claims.
He has earlier written to the Union fertilizers and chemicals minister assuring fertilizer firms will not be affected by the outcome of this corporate dispute.
Union power secretary H.S. Brahma told Mint he was not aware of this recent letter.
Utpal Bhaskar in New Delhi contributed to this story.
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First Published: Tue, Aug 04 2009. 12 39 AM IST