New Delhi: India’s solicitor general Gopal Subramanium has criticized the government for jeopardizing state-run power company NTPC Ltd’s case in the Bombay high court against the Mukesh Ambani-controlled Reliance Industries Ltd (RIL) over the supply of gas from the latter’s Krishna-Godavari (KG) basin, off the eastern coast of India.
In a related development, the government on Thursday decided to form a four-member ministerial panel, comprising finance minister Pranab Mukherjee, law minister M. Veerappa Moily, power minister Sushil Kumar Shinde and petroleum minister Murli Deora, to come up with a unified stand for it, said a senior cabinet minister, who did not want to be identified given the controversial nature of the issue.
The petroleum ministry and NTPC, which comes under the purview of the power ministry, have taken conflicting stands in the case between RIL and the Anil Ambani-controlled Reliance Natural Resources Ltd (RNRL) over gas from the former’s D6 block in the KG basin that is currently before the Supreme Court. The outcome of this case could have a bearing on the NTPC-RIL case.
The solicitor general said in his opinion to NTPC that the Union government should take a “carefully uniform and unified stand” to protect public rights and interests. He further added that “the present case (between RIL and NTPC) requires considered and matured reflection by the Central government”.
NTPC—as reported by Mint on 22 July—had sought the attorney general’s opinion on the government’s petition in the RIL-RNRL case and said that it could, based on this opinion, intervene in the case, too.
Attorney general Goolam Vahanvati and solicitor general are India’s top two law officers.
“We are examining the views given by the attorney general and solicitor general. The attorney general’s view is supportive of the solicitor general’s view. Based on these opinions, we are forming our strategy,” said a top NTPC executive, who did not want to be identified.
The lawsuit between NTPC and RIL in the Bombay high court dates back to December 2005 with the point of contention being the existence and terms of a valid contract between the two.
NTPC claims there is one in which RIL promised to supply 12 million standard cu. m a day (mscmd) of gas for the expansion of the state-owned power generator’s Kawas and Gandhar power plants, both in Gujarat, for 17 years at a price of $2.34 (Rs112.5) per million British thermal unit (mBtu). RIL claims otherwise.
Referring to RIL’s amendment in its plea in the high court in its ongoing dispute with NTPC that the contract between the two firms was scotched by the government’s policy on the pricing and allocation of gas, Subramanium, in his opinion to NTPC, said: “In fact, the said amendment by RIL seems to portray the Central government as the chief architect of the inability of RIL in being able to perform the contract.”
NTPC claims its contract with RIL dates back to 2004. The government fixed the price of RIL’s KG basin gas on 12 September 2007.
“It is indeed strange that RIL should place this burden on the Union of India as having impliedly taken away the fundamental basis of a very carefully structured bid, which must have been undertaken with the concurrence of the administrative ministry viz. the ministry of power of the government of India, and seeks to suggest that the contract is one which is incapable of performance,” Subramanium added in his opinion.
RIL amended its petition in the Bombay high court so as to include an earlier affidavit filed by the Union government in the same court, but in the case between RIL and RNRL (This is the same case that has now reached the Supreme Court). This affidavit, filed in June, had reiterated the decision of a group of ministers on the $4.2 per mBtu pricing and the policy for allocation of gas from the KG basin.
Subramanium also said that a private party (RIL) taking advantage of the government’s affidavit and using it as a primary defence could cause the government “great public embarrassment”.
Hari Shankar Brahma, the power secretary, declined to comment; and Shinde and Deora did not respond to phone calls or to a message left on their mobile phones.
RIL is contesting the claims of RNRL over the supply of 28 mscmd of gas from the offshore block for 17 years at $2.34 per mBtu, 44% cheaper than the government fixed price of $4.20.
RNRL is basing its claims on a 2005 family pact between the estranged Ambani brothers, but RIL has held that it cannot give gas to anybody without the approval of the government, the owner of all sovereign assets.
The government had, in a petition filed in the apex court on 18 July, made a case for scrapping the gas supply agreement between RIL and RNRL. The three-year-old corporate battle has escalated to the Supreme Court, which is scheduled to hear arguments on 1 September.
Subramanium’s legal opinion is also critical of the way NTPC has handled the entire issue. It finds fault with the state-owned firm for entertaining RIL’s requests for the modification of the gas sales purchase agreement and for a delay in initiating legal action. It suggests that NTPC seek the Union government’s intervention in the Bombay high court, and if that is not possible, then seek interim relief in the Supreme Court. Subramanium said NTPC should present its case to Prime Minister Manmohan Singh so that full facts are brought to the attention of the Union government.
“They (NTPC) have been given certain opinion. They should carefully process it and take it to the concerned ministries and then proceed,” said a senior petroleum ministry official, who did not want to be identified.
While a spokesperson for the Reliance-Anil Dhirubhai Ambani Group, of which RNRL is a part, declined to comment, an external spokesperson for RIL said: “Our respect for the judicial process determines that we present our views and contentions on all aspects of the case before the honourable court.”