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HC allows RIL to sell KG basin gas subject to final verdict

HC allows RIL to sell KG basin gas subject to final verdict
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First Published: Fri, Jan 30 2009. 07 05 PM IST
Updated: Fri, Jan 30 2009. 07 05 PM IST
Mumbai: The Bombay High Court on Friday allowed Mukesh Ambani led Reliance Industries Ltd. (RIL) to sell gas from KG basin at the government-approved price of $4.20 per mmbtu as an interim measure, while reserving judgment on a case brought by Anil Ambani’s RNRL.
HC lifted the stay on gas sale, noting that it was necessary as RIL had projected that gas production from KG basin may start by February end.
RNRL’s main contention was that RIL should supply gas on the terms it had agreed with NTPC - at $2.34 per mmbtu.
A division bench of Justices J N Patel and K K Tated said that today’s interim order would operate only till the pronouncement of judgment, and won’t affect parties’ rights.
RIL can, however, sell gas only as per the government’s priority list, which gives preference to fertilizer and power sectors in that order.
Although there was no indication from the court when the final judgment would be pronounced, RIL counsel Harish Salve said the verdict could come by March-end.
The two sides wound up their arguments on Friday in the case that has protracted for over two years now.
Both RIL and the government had sought vacation of stay. After hearing, additional solicitor general Mohan Parasaran said that due to today’s order, “the gas would not go to waste... RIL will have to sell gas as per the government’s utilization policy, at $4.20 per mmbtu.”
The order says: “The sale of gas would be made by RIL at uniform price of $4.20 to all parties including public sector undertakings and to others in the order of priority as stipulated by the government in the approved gas utilization policy.”
RIL can enter into contracts with other parties for a term of up to five years.
RIL and RNRL had entered into an agreement for gas supply after the two Ambani brothers parted ways. Under this agreement, RIL was to supply 28 mmscmd of gas to RNRL for Anil Dhirubhai Ambani group’s proposed power plant at Dadri.
But RNRL was not happy with the terms of the Gas Supply Master Agreement (GSMA), so it moved the HC to ban RIL from selling gas to any third party.
RNRL’s grouse was that GSMA was not in accordance with the memorandum of understanding between Anil, Mukesh and their mother Kokilaben Ambani, which set out how the Reliance group will be divided between the brothers.
GSMA offered by RIL did not give guarantee of price, quantity and duration of supply of gas, RNRL said, alleging that the agreement was not good enough to raise funds for the Dadri power project.
RNRL wanted gas at $2.34 per mmbtu, but RIL said that price would be “subject to government approval.”
A single judge of the HC, in 2007, ruled that the GSMA was not “bankable” and asked both sides to negotiate a new contract. But the parties failed to work it out and filed appeals before a division bench.
The issue became more complicated as the government intervened in the case and stated that it had the right to fix the price and also dictate whom RIL should sell gas to.
Later, government stated that price of KG gas - for all the buyers - could not be less than $4.20. RNRL said this was not acceptable, as government had no right to decide the terms of contract between RIL and RNRL.
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First Published: Fri, Jan 30 2009. 07 05 PM IST
More Topics: RIL | RNRL | Reliance | Mukesh Ambani | Anil Ambani |