New Delhi, June 29: In a new twist to the gas dispute between Ambani brothers, the Ferteliser Ministry on Monday said private family agreements cannot over-ride national priorities.
Urea plants had been given the first priority in sale of
natural gas from Reliance Industries' D6 but the Bombay High
Court had upheld the Ambani family, giving 70 per cent of the
initial volumes from the fields to Anil Ambani Group's RNRL.
"The gas in question has been allocated (to fertiliser,
power and other sectors) based on the Government's authority
and rights under the Production Sharing Contract (for D6)
aimed at regulating gas marketing and allowing their orderly
growth," Fertiliser Secretary Atul Chaturvedi wrote to his
counterpart in the Petroleum Ministry, R S Pandey, on June 24.
"Our understanding is that any family settlement would
not over-ride the sovereign right of Government to formulate
policies aimed at larger public interest," he wrote.
When contacted, Pandey acknowledged receipt of the letter
and said "they have raised an issue which will need to be
examined".
"In this context, implications of the judgement will have
to be legally examined," he said.
Twelve urea manufacturing companies were allocated 14.97
million cubic meters per day when the government prioritised
sale of the initial 40 mmcmd from D6 primarily between
fertiliser and power companies based on national priority of
food security and meeting energy deficit.
But the Bombay High Court on June 15 ruled that RIL
should honour its commitment in the family split agreement and
supply 28 mmcmd gas to RNRL.
"If such a private arrangement has implications on
already signed Gas Sales and Purchase Agreements for the
allocated gas and if the existing rights of fertiliser
companies are altered to their disadvantage, I am afraid they
may also seek available legal remedies independently,"
Chaturvedi wrote.
He sought a re-confirmation from the Petroleum Ministry
that "existing gas allocation, its price and GSPAs would
remain intact."
The fertiliser industry, he said, had sought a
re-confirmation to the effect that the recent Bombay High
Court judgement would have no implications on the supply of
gas from KG basin.
"The clarification/re-confirmation in this regard will
remove the uncertainty in supply of feedstock to the
fertiliser industry.
"This would also have implications on the fuel oil and
naphtha based urea units, which are making large investments
to switch feedstock to natural gas as per the declared policy
of the government," he wrote.
Chaturvedi said the fertiliser industry was allocated
about 15 mmcmd of gas from D6 as first priority under the Gas
Priority Utilisation Policy of the Government.
Pandey said the Fertiliser Secretary had sought a
reconfirmation of gas supplies to urea plants in context of
the Bombay High Court judgement. "Implications of the
judgement (on supplies) will have to be examined."
The Bombay High Court had said that the terms of supply
to RNRL would be based on RIL's bid for a 2004 NTPC tender.
The price in NTPC tender was USD 2.34 per million British
thermal unit, 44 per cent lower than government-approved rates
of USD 4.20 per mmBtu.
The Bombay High Court on June 15 gave RIL and RNRL a
month's time to work out firm gas volumes, price, timelines
and other commercial details for sourcing the fuel from
Krishna-Godavari basin fields.
RIL can currently produce 37 mmcmd of gas per day from D6
fields but was producing only 28 mmcmd as some power and
fertiliser companies are not taking their allotted quantities.
In the MoU that split Dhirubhai Ambani's business empire,
the Mukesh Ambani-run firm had committed to supply 28 mmcmd to
power plants of the group run by his younger brother for 17
years.
Mukesh had got petrochemicals, refining and the oil and
gas business while the power plants, telecommunications and
the financial services business had gone to Anil in the split.
The price in the MoU was the same as the one RIL had bid
for in a 2004 NTPC tender.
RIL had bid to supply 12 mmscmd gas to NTPC at USD 2.34
per mmBtu but a Gas Sales and Purchase Agreement could not be
signed because of dispute between the two over clauses like
liability in the case of default. NTPC has dragged RIL to the
Bombay High Court seeking performance of the bid in a separate
case.
Bureau Report