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Now for cool calculations

Three questions arise from Friday’s Supreme Court verdict on the dispute between the Brothers Ambani over a gas supply contract.
Hindustan Times | By HT Correspondent, New Delhi
UPDATED ON MAY 07, 2010 09:22 PM IST

Three questions arise from Friday’s Supreme Court verdict on the dispute between the Brothers Ambani over a gas supply contract.

Let’s take them in an ascending order of importance. One, the court has asked Mukesh and Anil Ambani to renegotiate the gas supply agreement they had reached in 2005 as part of a division of the family business. Since the court has laid down that the price of gas stands as determined subsequently by the government, it is counter-intuitive how the disputing parties can find common ground if they cannot haggle over the price.

Two, the verdict throws open to debate the issue of who owns the country’s natural resources. If the government has, through production-sharing arrangements, overriding powers to determine who these should be sold to and at what price, private participation in prospecting will remain a pipedream. As it is, exploration for gas in India — after years of prospecting by the State — has drawn a cold response from . Gas offers India its easiest route out of energy insecurity and home-grown private capital has delivered one of India’s largest finds. The government, as directed by the apex court in line with the established tradition of not interfering in executive policy, will have to work out a mechanism that does not weigh in against the private prospector. Particularly, if the government chooses to remain both player and umpire at the same time. Energy is but one area where the country desperately needs sophisticated exploration, the gas concession policy will be a benchmark for an entire gamut of minerals.

Three, the sanctity of contracts. Granted governance is in continuum and any agreement among individuals has to comply with the extant legal framework, even retrospectively. Yet the message from this ruling is clear: individual freedom must yield to the current orthodoxy of the collective good. This cannot be faulted on paper, but foreigners may need to be convinced of doing business in such a framework. Had the losing side in this dispute been a foreign oil company, the legal battle would very likely have moved to international fora where the rights of an individual are accorded greater dignity. The points of law apart, the verdict will significantly alter the business plans of the world’s wealthiest brothers. Anil Ambani may have to retool his power capacity plans while Mukesh may be able to concentrate more on hydrocarbon exploration. India needs both to find success in their respective paths in order to lessen its debilitating shortage of energy.

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