Ambani gas pact flouts government authority, says oil ministry

Ambani gas pact flouts government authority, says oil ministry

New Delhi: The union oil ministry on Tuesday declared that the part of the Ambani family memorandum of understanding (MoU) that divides natural gas found by Mukesh Ambani-led Reliance Industries Ltd, or RIL, between him and estranged brother Anil Ambani’s group firms is against public interest, flouts government authority and will set a wrong precedent.

Responding to comments sought by the prime minister’s office on a letter from billionaire industrialist Anil Ambani, the ministry last week wrote that the family MoU was clearly against the provisions of the production sharing contract (PSC) and will harm the public interest.

Anil Ambani had on 15 July written to Prime Minister Manmohan Singh seeking a direction to the oil ministry to stop favouring RIL in a commercial dispute with Reliance Natural Resources Ltd. (RNRL), which is part of the Reliance Anil Dhirubhai Ambani group.

Reacting to the oil ministry’s letter, a Tuesday statement from an RNRL spokesperson said the ministry continues to misguide all concerned including the PMO by hiding, misquoting and misrepresenting facts despite being in full knowledge of the details of the gas supply arrangements between RIL and RNRL way back in June 2006, if not earlier.

The Bombay high court’s 15 June order that upheld the MoU, gives precedence to a private family MoU over the government’s rights under the PSC, the policies approved by the Government and the Constitution of India, the oil ministry said in its letter.

The court had asked RIL to supply at least one-third of peak output to RNRL at $2.34 per million British thermal unit (Btu), or 44% lower than the government approved price of $4.20 per million Btu.

In its letter, however, the ministry said: Natural gas has to be sold as per the gas utilization policy of the governnment. RIL’s freedom to market as per the PSC, is subject to the gas utilization policy (outlining sectoral priorities) and the pricing formula to be approved by the government.

Calling the private arrangement to distribute natural gas for private business plans nothing but monopolising a vital natural resource, the ministry said this would set a bad precedent. In its response, RNRL said that if the ministry was convinced that the RIL-RNRL gas supply agreement was against the PSC, it should terminate the contract with RIL.