A three-judge Supreme Court bench said the Ambani brothers should have no “misgivings” about the government’s total control over the country’s natural assets and its right to set the prices of gas.
The bottomline of the judgment is that no matter what, natural gas cannot be sold for less than $4.2/unit, the price set by the government. This means that the Anil Ambani-owned RNRL will not get natural gas at the $2.34 per unit that it wanted. The impact was evident on the stock prices of ADAG firms RNRL, Reliance Power and Reliance Infrastructure, which were down eight per cent to 20 per cent. The dispute concerned the supply of natural gas from the Krishna-Godavari basin, a gas field operated by Mr Mukesh Ambani’s Reliance Industries Ltd.
The court ruled that the natural gas of the Krishna Godvari basin is owned by the government of India and cannot be bought and sold by private parties. The right to sell the gas that RIL enjoys as the operator of the field is also not absolute, and any sales must conform to the norms laid down in the production-sharing contract. The court has also asked the two litigating groups to thrash out a gas supply contract — within the guidelines set by the government. Mr Mukesh Ambani was directed to initiate the renegotiation process with his younger brother, Mr Anil Ambani. The court asked the brothers to sit together within six weeks and rework within the next eight a gas supply agreement in conformity with the government policy.
Speaking to the media, Mr P.M.S. Prasad, executive director of RIL, said they would soon open negotiations with RNRL but wouldn’t be able to supply gas for 17 years as the field’s life was just 11 years. Coupled with the higher price, this means the 8,000mw power project proposed by ADA Group at Dadri may not be implemented. The court has also said that the MoU signed between the two Ambani brothers is not a legally binding document.
In a conference call, ADAG chairman Anil Ambani said there were no plans currently to contest the court’s judgment. Reacting to the verdict, petroleum minister Murli Deora said, “The Supreme Court verdict upholds the fact that gas belongs to the government and the people of the country and that is what we have been saying.”
Meanwhile, Union minister for power Sushilkumar Shinde said the court’s verdict will have no impact on the gas supply case that state-owned NTPC is fighting with RIL. In a press conference, Mr Harish Salve, a part of RIL’s legal team, said Mukesh and Nita Ambani wanted to put the unpleasantness behind.
Age Correspondents