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Rediff.com  » Business » More than one riddle for govt in RIL gas case

More than one riddle for govt in RIL gas case

July 16, 2009 10:53 IST

Among the issues the government will have to take a stand on before the Supreme Court in the Reliance gas dispute case are the consequences of the use to which the supply is sought to be put, given the existing arrangements.

Anil Ambani's Reliance Natural Resources Ltd is laying claim (through a family agreement prior to the group's split) to gas from estranged brother Mukesh Ambani's Reliance Industries Ltd at a fixed price of $2.34 per mBtu for a fixed number of years. The gas, from RIL's Krishna-Godavari D-6 find, has already been allocated to various user industries by the government at a fixed price of $4.2 per mBtu. RNRL is laying claim to 70 per cent of the current output to begin with.

Till its Dadri power unit begins functioning, RNRL says it plans to supply gas from RIL's D-6 to RIL's own existing customers at the agreed price of $4.2 per mBtu if it succeeds in getting a favourable judgement from the SC. This is a stand it had maintained during the arguments in the Bombay high court.

This would mean RNRL would buy gas from RIL at $2.34, but sell to fertiliser and power companies at $4.2 per mBtu. The company, however, says it does not want to profit from the difference but will deposit the quantity in an escrow (independent) account or with the Supreme Court or give a bank guarantee for the amount till such time its own power plant starts operation. "It is not that we want to make money," a senior RNRL executive told Business Standard.

He added that the arrangement was required since the Dadri (in Uttar Pradesh) unit would only come up in three years and it would lose out those many years of supply for its plant.

The benefit accruing to it from the 17-year gas sales and purchase agreement it planned to sign with RIL would also stand reduced. "The money thus deposited could be given to us later to make up for the difference between the price agreed now and the price RNRL will have to buy gas for three years later," said the executive.

RIL, in its petition to the SC, had said that in case it is asked to supply 28 mmscmd of gas at $2.34 and RNRL supplies it at market prices to consumers, it would result in RNRL "making huge profit at the expense of the government".

There could be problems in such an arrangement, since it is RIL that has signed the GSPA with users and it would need to be changed with RNRL as supplier. Besides, the GSPAs with existing customers are for five years; Dadri will start consuming the gas in three years.

Asked to comment, fertiliser secretary Atul Chaturvedi (fertiliser units get first claim on the gas) said, "We just want the gas supply for the fertiliser sector to be intact and we have written to the petroleum ministry. We expect them to take care of the interest of the fertiliser sector."

RNRL in its SC petition, has asked the court to restrain RIL from supplying gas to any other company. RNRL is laying claim to 28 mmscmd of gas immediately, from the initial 40 mmscmd produced from D-6.

"We will supply to the same set of consumers as RIL under the gas utilisation policy," said its executive.

Jyoti Mukul & Ajay Modi in New Delhi
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