KGBasin

Two judges of a three-member bench delivered separate verdicts on the ongoing Ambani gas row between Mukesh Ambani’s Reliance Industries and younger brother Anil’s Reliance Natural Resources. The case involves terms of a deal under which Reliance Industries was to supply Anil Ambani’s Reliance Natural with 28 million standard cubic metres a day (mmscmd) of gas for 17 years at a rate below the government price.

Reliance Industries CMD, Mukesh Ambani had argued the private deal cannot take precedence over government policy, which determines who can receive gas and at what price.

RNRL’s Anil Ambani, who claimed otherwise, rolled out a series of front-page advertisements in major newspapers accusing the government of taking the side of Reliance Industries.

Agreeing with RIL’s argument, the Chief Justice of India issued a final verdict that said a memorandum of understanding between the two brothers signed in 2005 is not binding on RIL, a government contract over-rides all private agreements. SC has asked both brothers to sit down and re-negotiate the gas supply master agreement (GSMA) and then come back to the Court in 6 weeks. The verdict further said that gas is a national asset and belongs to the government till delivered to the consumer. The court said it will give its direction in 8 weeks.

The verdict means that the re-negotiation has to take place within the ambit of the government’s policy. Further the judgement adds that the government regulation must dictate the renegotiation plan and RIL and RNRL should renegotiate under government rules.

Minutes after the Supreme Court declared the verdict in favour of RIL, in the Ambani Gas Row, Oil Minister Murli Deora welcomed the move and called it a vindication of the Govt’s stand. “The Govt is satisfied with the verdict. The Govt has the power to decide the price of gas and the power to allocate.”

Oil Secy S Sundareshan added, “Right from the beginning, the Ministry has been saying that gas is the property of the nation, and we believe the court has upheld the terms of the Production Sharing Contract.”

“Now there is complete clarity on gas policy and the decision of the Bombay High Court has been quashed. We will continue to regulate gas pricing and policy in future.” However, he also said that he was unaware of what has to be renegotiated in the case.

Source:http://reliance-news.blogspot.com/2010/05/ambani-gas-row-government-emerges.html

The Supreme Court reserved its judgement in the Ambani Gas Row on gas supply and pricing between the Ambani brothers with Government asserting that the title to the natural gas vests with it.

“Title to the natural gas under the production sharing contract (PSC) vests with government and does not automatically pass to the contractor,” Solicitor General Gopal Subramanium submitted before a Bench headed by Chief Justice K G Balakrishnan.

Hearing in the case was spread 26 days since it commenced on October 20. It also witnessed the recusal of Justice R V Raveendran from the Bench after hearing the matter for six days on the ground that he held shares of both RIL and RNRL.

Responding to the contention of Anil Ambani-led RNRL that the title of the gas inevitably passes to the contractor, which is Mukesh Ambani Group RIL, upon reaching the delivery point, Subramanium said the PSC specifically provides for and recognizes the fact that “Government is the sole owner of the gas” and the title passes to the contractor only at the delivery point when it sells the gas to the buyer”.

“Government has its PSC. Please do preserve it and don’t allow any interpretation otherwise it would lead to trouble in future,” he submitted before the Bench also comprising Justices B Sudershan Reddy and P Sathasivam.

“PSC is really one of the nobel instrument by which government control over the gas reservoir. Our PSC is being subjected to lateral attack, interpretation and assault,” Subramanium said.

He denied the allegation of RNRL that Government was acting in mala fide manner and siding with RIL. “I deny all allegations of mala fide. Our problem is independent of the parties in dispute,” he said adding that “we (government) are compelled to be present in this dispute as we want to preserve the contract”.

He said though RIL and RNRL are fighting over the gas supply and its price, it is the government which has lot of worry as it has to determine the price and come out with means on how the cost of production has to be recovered.

The Solicitor General said the price of gas was brought down from USD 4.33 to 4.20 per unit on the basis of the formula approved by former RBI Governor C Rangarajan.

He said RNRL has been demanding that the gas at the norms of NTPC but allocation of gas has not been made to the PSU.

Earlier, RIL counsel Harish Salve concluded the counter-argument to the submission of RNRL by contending that family MoU of 2005 was not binding for supply and pricing of gas from the KG Basin.

RNRL counsel Mukul Rohatgi said “our only concern is we should get the gas on NTPC terms. I am riding on NTPC agreement”.

Salve, while making the submission, said the NTPC contract was perhaps not appropriate. “Why I should repeat the same mistake which I have done with NTPC?” he said.
RIL has entered into agreement with the NTPC to supply the gas from KG Basin at USD 2.34 per unit.

RIL and RNRL are pitched in a high-voltage legal battle for the supply of gas from the KG Basin.

While RNRL is seeking gas at a committed price of USD 2.34 per unit, Mukesh Ambani’s Reliance says it cannot honour the commitment made in the family agreement reached four years back due to government’s pricing and gas policy.