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Decision to be Made on RIL's Freedom to Price Gas

The over-two-year-old legal battle between the Ambani brothers over gas pricing looks to be moving towards some conclusion

The over-two-year-old legal battle between the Ambani brothers over gas pricing looks to be moving towards some conclusion.

The Bombay High Court on Tuesday asked the central government to give a clear ‘yes’ or ‘no’ on whether the Mukesh Ambani-promoted Reliance Industries (RIL) has the freedom to price its gas as it wants.

“Can you tell RIL that you cannot supply the gas [at prices other than as fixed by the government]?” a division bench of justice J N Patel and justice K K Tated asked.

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The judges remarked that if the government has the authority under its contract with RIL to set the price at which the gas from the Krishna Godavari basin is to be sold, the question of the Anil Ambani group getting it at a cheaper rate does not arise.

RIL had been arguing that it does not have the freedom to sell the gas from its D6 block in Krishna Godavari basin without first getting the price approved by the government.

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The Anil Ambani-promoted Reliance Natural Resources (RNRL), on the other hand, has been arguing that under the terms of engagement between the government and RIL, the latter has the freedom to determine the price at which it will sell the gas.

RIL had entered into a deal with RNRL in 2006 to supply gas at relatively cheap rates as part compensation for Anil Ambani relinquishing his rights in RIL.

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The counsel for the central government, retired justice T S Doabia, refused to take a stand on the issue and asked for time till Friday to file a reply.

When the judges asked him if it was true that RIL has the right to sell the gas at any price “as long as you [the government] get your share,” he replied, “That is not true.”

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The bench said the issue can be settled if the government comes forward and says that RIL has no right to sell the gas in violation of the government policies in this regard.

“Can you tell the contractor [RIL] not to supply any gas [to RNRL] because, according to the gas allocation policy, RNRL is nowhere in the priority list?,” the bench asked, pointing to the gas allocation policy announced by the government in June.

According to it, the top priority for supply of natural gas is for the fertiliser sector, followed by existing gas-based power plants and city gas distribution projects.

According to the policy, which was announced “without prejudice” to the matter sub judice, RNRL, which has does not have an existing power plant, will not qualify as a buyer of natural gas under the present circumstances.

The judges pointed out that if, under the terms of engagement, the government had the right to dictate prices to RIL, it need not have approached the court in the case of RIL not supplying gas to NTPC.

Both NTPC and RNRL are fighting Mukesh Ambani’s RIL to get gas at cheaper rates. RIL, however, wants to sell the gas from its D6 field at market price or the relatively higher price arrived at by a group of ministers last year.

The government counsel did not have a clear answer when the judges asked if the priced arrived at by the group of ministers was a sale price or only meant for calculating the government’s profit-share from gas sales.

“Once the contractor gets the contract, is he free to sell it any price as long as you get your share?” the bench asked the government counsel.

Doabia said he will ask a senior government official to remain present before the court on Friday and requested for time till then to file a reply.

Another government lawyer said they will present the production sharing contract, which lays out the powers and responsibilities of RIL and the government with regard to the gas field and production, before the court on Friday.