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RIL ready for talks, but govt role key

Mukesh Ambani-controlled Reliance Industries Ltd said on Friday that it was ready for re-negotiation of the gas agreement with Anil Ambani’s Reliance Natural Resources Ltd but said all negotiations will be governed by the government’s policy and the Production Sharing Contract as directed by the Supreme Court.

business Updated: May 07, 2010 22:45 IST

Mukesh Ambani-controlled Reliance Industries Ltd (RIL) said on Friday that it was ready for re-negotiation of the gas agreement with Anil Ambani’s Reliance Natural Resources Ltd (RNRL) but said all negotiations will be governed by the government’s policy and the Production Sharing Contract (PSC) as directed by the Supreme Court.

“The terms of supply (negotiations) will be done in line with the government's pricing and utilisation policy,” PMS Prasad told Hindustan Times in a telephonic interview.

“The price will be what the government has fixed... supplies will be subject to Government allocating the fuel (to RNRL or its affiliate company) and the tenure of supply will have to be in line with development plan approved for the Krishna-Godavari (KG)-D6 fields," he said.

While RIL said it may sell gas from its KG-D6 fields to RNRL at $4.20 per unit if the government allocates fuel to the Anil Ambani Group firm, it has expressed reservations over the tenure of gas supply and said it will have to be drastically cut from 17 years as being sought by RNRL.

“RIL will renegotiate the Gas Supply Master Agreement (GSMA) in line with the government policy,” he said. “The price will have to be $4.20 per unit and the tenure shorter.”

In the 2005 family MoU and the January 2006 GSMA, RIL was to supply 28 million standard cubic meters per day of gas to RNRL for 17 years at $2.34 per unit.

The gas was sought by RNRL to fire its proposed 7,800-MW power plant in Dadri, Uttar Pradesh. However, the government in September 2007 approved a price of $4.20 per unit and prioritised existing fertiliser and power plants.

The Supreme Court has upheld the company’s position that the government has a right to approve the price of gas and fix its customers, Prasad said.

“It is a total vindication of what RIL has been saying all along that this gas sector is regulated by the government and we have to work within the ambit of government policies.”

“Gas utilisation policy and prioritisation of customers is beyond doubt and that has been upheld by the Supreme Court and we have to work within the ambit of this policy.”

The court has also said that the Ambani family MoU was not legally binding on RIL, he said.