The Hindu Business Line : Let Reliance pay us difference in gas price, RNRL tells court

Legal wrangle
RNRL alleges that had RIL signed a ‘firm gas sale agreement’ in January 2006, it could have had the Dadri power plant running by 2009
RIL had argued that RNRL did not have any operational gas based power plant to use gas from RIL’s KG basin

Rahul Wadke

Mumbai, Oct. 18 The Anil Ambani Group company Reliance Natural Resources Ltd (RNRL) has asked Reliance Industries Ltd to pay RNRL the difference between the price at which RIL will sell gas to other buyers and $2.34 per mmbtu (million British thermal unit), the rate at which RNRL is seeking supply of gas.

The suggestion was made by RNRL counsel Mr Mukul Rohatgi as an interim solution to the ongoing dispute between RIL and RNRL on supply of gas. Mr Rohatgi told the Division Bench of the Bombay High Court that it may ask RIL to pay to RNRL the difference in price for three years.

Mr Rohatgi said that had RIL signed a ‘firm gas sale agreement’ with RNRL in January 2006, the company could have had the 8000-MW power plant in Dadri, Uttar Pradesh up by 2009. Therefore RIL should be directed to sign a proper agreement with the company.

Alternatively, RNRL should be allowed to trade in gas for three years (by then the Dadri power plant would be completed) to compensate the loss it suffered due to the delay and litigation.

The suggestion was made in response to the RIL argument that RNRL does not have any operational gas based power plant to use gas from RIL’s KG basin.

Gas from the KG basin field is expected to flow by the first quarter of 2009.

Mr Rohatgi said that current gas supply agreement with RIL was not bankable. Therefore, the court should direct RIL for arriving at an agreement with RNRL which could be used to raise funds, he said.

Since it is eligible for 28 mmscmd of natural gas under the demerger scheme it should be allowed to trade the gas for three years as an interim solution, Mr Rohatgi said.

He said that if RIL starts supplying gas without delay, RNRL can also supply 12 mmscmd (million standard cubic metres per day) of gas at the rate of $2.34 per mmbtu to NTPC till its power plant comes up in Uttar Pradesh.

RNRL’s senior counsel Mr Ram Jethmalani on Thursday had also proposed the same to the court that the company was willing to sell gas at $2.34 per mmbtu to NTPC. The company could still make a profit after selling the gas at that rate, he had said.

On Friday, RNRL passed a board resolution saying that it was ready to supply gas to NTPC.

Mr Rohatgi said that RIL in order to thwart any attempt to have a bankable gas supply agreements, crucial terms in the agreement have been given multiple definitions creating ambiguity. RNRL wants the gas for 17 years but the current gas supply agreement does not assure them of the supply, he said.

The Division Bench suggested to RNRL that if court were to accept RNRL’s case, it can order that the contract period of 17 years would start only after the Dadri plant is ready.

“Please don’t do that,” Mr Rohatgi said adding that a better option would be to allow RNRL to take gas immediately.

The argument will continue on October 20.

Related Stories:
Gas issue: RIL rules out out-of-court settlement
RIL-RNRL dispute: Prolonged uncertainty

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