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Ambani dispute: HC allows Centre to fix gas price

Reliance Industries Ltd gets a partial relief as the Bombay HC allows the Centre to go ahead with the process of fixing the price of fuel, reports Urvi Mahajani.
Hindustan Times | By Urvi Mahajani, Mumbai
UPDATED ON JUL 19, 2007 02:51 AM IST

In what can be termed as a partial relief to Mukesh Ambani-led Reliance Industries Limited (RIL) over the pricing of natural gas, the Bombay High Court on Wednesday allowed the Centre to go ahead with the process of fixing the price of fuel.

The court has, however, refused to stay the order by a single judge restraining RIL from creating third party rights for the entire natural gas to be produced from its Krishna-Godavari basin block off the eastern coast before giving the share to Anil Ambani-led Reliance Natural Resources Limited (RNRL) and National Thermal Power Corporation (NTPC).

A division bench of Justice JN Patel and Justice Amjad Sayed kept the matter for further hearing after eight weeks. The bench is hearing appeals filed by RIL challenging the interim order of a single judge restraining it from selling gas to a third party.

Justice AM Khanwilkar of the HC, in an interim order, had restrained the RIL from selling gas on a petition filed by Anil Ambani-led RNRL. On May 3, Khanwilkar had in an interim order restrained RIL from entering into any contract for supplying to a third party the 28 million cubic metres committed to RNRL under the 2005 separation agreement between the two brothers.

The bench has said that the government can go ahead with the process of fixing the price of gas as per the contract for the field, without any prejudice to either party.

The price fixation between the government and RIL as per the production-sharing contract is only for the purpose of valuation of the government share of profits. The price fixed between RIL and the government will have no prejudice to the rights of RNRL, the court has clarified.

RNRL has alleged that due to RIL's lack of commitment to supply gas, its Rs 1,000-crore, 8,000 megawatt power project plant at Dadri near Delhi was being unnecessarily delayed.

As per the agreement between RIL and RNRL signed in January 2006, NTPC gets the first right over the gas produced and it is to be given 12 million cubic metres of gas a day. After that, 28 million cubic metres is to be given to RNRL, 25 million cubic metres is to be used by RIL for its commercial purposes. an additional 40 per cent of the balance gas, which is approximately 16.6 million cubic metres, is to be given to RNRL after distributing the first three components.

An agreement signed between RIL and RNRL after the demerger of the Reliance group in 2005 had fixed the price at $2.34 per million British thermal units.

The main bone of contention between the Ambani brothers is the agreementwhich according to Anil's group was finalised when the unified Reliance had split but Anil was yet to take over RNRL.

RIL's agreement with National Thermal Power Corp project too has run into litigation as it claims that the agreement had not been finalised. A petition filed by NTPC is still pending.

RIL plans to begin production from the block lying in Andhra offshore from July 2008, with an initial production of close to 40 million standard cubic metres of gas per day. Peak output would touch 80 million cubic metres later.

The main petition filed by RNRL, based on which restraining order was passed on RIL, is likely to come up for hearing before the single judge on Thursday.

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