The Hindu Business Line : Court directs Reliance to sell gas to RNRL at $2.34

Mumbai, June 15 The Bombay High Court has asked Reliance Industries to supply 28 mmscmd (million metric standard cubic metres per day) of gas from its Krishna-Godavari basin to Reliance Natural Resources Ltd for $2.34 per mmbtu (million metric British thermal unit).

The pricing was the bone of contention as the Mukesh Ambani-promoted RIL went by the figure of $4.2 per mmbtu decided by the Empowered Group of Ministers (EGoM). The verdict on Monday is being seen by observers as a shot-in-the-arm for RNRL which is part of the Anil Ambani group.

RIL reaction

“The full text of the judgment is being reviewed by us. We will decide on the future course of action based on legal advice,” an RIL spokesperson said.

The Court also said that should RIL and RNRL not arrive at a suitable arrangement, they could approach Ms Kokilaben Ambani, mother of Mr Anil and Mr Mukesh Ambani, to find a way out of the impasse. They could also approach the Company Court (which is part of the Bombay High Court) to work out an appropriate arrangement.

The Court asked RIL to enter into a gas supply agreement in a month with RNRL for 17 years. The quantity of 28 mmscmd could increase by another 12 mmscmd if another contract between RIL and NTPC, now being contested in the Court, is terminated.

Incidentally, this also pertains to the pricing of gas and NTPC is seeking supplies at $2.34 per mmbtu, and not $4.20. It now remains to be seen if the public sector company also can get a verdict in its favour . A senior NTPC official told Business Line, “So far, we have not seen the order and, therefore, cannot comment.”

‘Complete success’

Senior counsel Mr Mukul Rohatgi representing RNRL told Business Line that the verdict was a “complete success” as the Court order clearly defines the rate, tenure and quantity of gas supply. All these three parameters were “deliberately left ambiguous” by RIL in the gas supply master agreement. RNRL had approached the Court to have them clearly defined so that it could have a bankable agreement for its mega power plant at Dadri in Uttar Pradesh. Mr Rohatgi added that the role of Company Court was only for the implementation of the order, and not for a fresh argument of the whole case, “If RIL does not accept the verdict, the only option for it is to approach the Supreme Court,” he said.

Backgrounder

RNRL was entitled to receive natural gas from the RIL-controlled KG basin gas field under the MoU which was the basis of the demerger agreement of the original Reliance group. Consequently, both companies entered into a pact for supply of gas till January 2006. Post-January, there was no further action on the supply issue. RNRL then approached the Bombay High Court with a company application in November 2006 to ensure that along with its associates, it receive gas supplies to the tune of 28 mmscmd.

The sale of gas by RIL was banned by the court through an interim injunction obtained by RNRL in 2007 which contended that it had the first right to the gas under the family agreement.

In mid-2008, the Petroleum Ministry approached the court and was made an intervener in the case. The Ministry’s contention was that as the gas was government property, it had a say in the matter and it should not be sold below $4.20 as decided by the EGoM.

In January 2009, the Court allowed RIL to sell natural gas from its KG basin block at the Government approved price of $ 4.20/mmbtu till the final judgment case was pronounced.

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