Mumbai: The fight between Mukesh Ambani, the chairman of Reliance Industries Ltd (RIL), and his estranged younger brother Anil Ambani, the chairman of Reliance Natural Resources Ltd (RNRL), continued along expected lines on Wednesday.
An executive from the Reliance-Anil Dhirubhai Ambani Group (R-Adag) launched a media offensive and sought to highlight alleged irregularities in RIL’s production of gas from the D6 block in the Krishna- Godavari basin off India’s east coast.
And Mukesh Ambani and his team responded, like they usually have, by keeping silent.
The fight between the two brothers over gas that RNRL wants so badly for its Dadri power plant in Uttar Pradesh, however, continues to cause significant collateral damage. Already, RNRL has targeted petroleum and natural gas minister Murli Deora—he was subsequently forced to defend himself in Parliament on Monday—and the head of the Directorate General of Hydrocarbons (DGH), a government body that regulates the production of oil and gas, V.K. Sibal. On Wednesday, Reliance Power Ltd’s chief executive J.P. Chalasani alleged that two of the three technical experts who had validated RIL’s capital expenditure for the D6 block had a “conflict of interest” and were “not independent”.
Reliance Power is part of R-Adag and Chalasani is also a spokesperson for RNRL.
On Tuesday, DGH had said that RIL’s capital expenditure—it holds the key to how the profits from the block are to be shared between the company and the government—had been vetted by these experts.
In a press briefing on Wednesday, Chalasani also asked the government to publicize the “recently completed” audit report by the Comptroller and Auditor General of India (CAG), the third entity mentioned by DGH as having vetted the D6 spend plan. CAG is the government’s audit watchdog.
Chalasani alleged that RIL’s capital expenditure on the D6 block had almost quadrupled from $2.47 billion (Rs11,782 crore today) to $8.84 billion between 2004 and 2006, while the output in the same period had only doubled. This is against the concept of scale economies, he said.
RIL is contesting the claims of RNRL over the supply of 28 million standard cu. m a day (mscmd) of gas from the block for 17 years at a 44% cheaper price of $2.34 per million British thermal unit. RNRL is basing its claims on a 2005 family pact, but RIL has consistently held that it cannot give gas to anybody without the approval of the government, the owner of all sovereign assets.
The three-year-old corporate battle has escalated to the Supreme Court, which is scheduled to hear arguments of the stakeholders on 1 September.
In its filings, statements and so-called “deep background” media briefings, RIL has pitched the gas as a sovereign asset being held to ransom by RNRL.
The government, in response, has said it would seek to protect the country’s interests and resources.
In the past two weeks, however, RNRL has moved its focus away from the family pact and sought to highlight alleged inconsistencies in the functioning of the ministry of petroleum and natural gas, and the way RIL has been allowed to operate the block.
A Mumbai-based analyst at a domestic brokerage said these could be pressure tactics that could force the government away from aligning with RIL, as R-Adag believes is the case. The analyst did not want to be identified, given the sensitivity of the case.
The government remained silent on Wednesday. Petroleum secretary R.S. Pandey declined comment while petroleum minister Deora did not respond to phone calls and a message left with his assistant. Sibal did not respond to phone calls and a text message to his mobile phone.
Late on Wednesday, a story by news agency PTI had DGH saying that the increase in capital expenditure was warranted as production facilities were increased from 40 mscmd to 120 mscmd, and the field’s life was increased from nine years to 13 years.
“I don’t want to join issues with them, but you should let people who know this subject decide on the issue,” the agency quoted Sibal as saying.
On Tuesday, Sibal had taken the fight to RNRL and said it was making the gas dispute an “obsessive subject of endless public debate” and added that the contractor—RIL in this case—has no gains in artificially ballooning or “gold plating” the costs.
Later on Tuesday, an RNRL statement had expressed “surprise” at DGH’s comments, saying they “were best avoided” as the firm was doing all this “in the interests of enhancing Government’s revenues by potentially up to Rs30,000 crore”.
Sibal also said on Tuesday that RIL’s costs had been “validated by Indian expert P. Gopalakrishnan as well as by international engineering consultant Mustang International”. Chalasani claimed on Wednesday that “Mustang Engineering (has been) advising RIL on various assignments” and that Gopalakrishnan was affiliated with institutions in which Mukesh Ambani had an interest.
Utpal Bhaskar in New Delhi and PTI contributed to this story.