Mukesh Ambani promoted Reliance Industries (RIL) will lose around $1 billion (Rs 4300 crore) a year, if it sells gas to Anil Ambani promoted Reliance Natural Resources (RNRL) at the agreed price of $2.34 per million British thermal unit (mBtu).
“If RIL is compelled to sell gas to RNRL at the said price, it will be paying huge subsidy to the company,” said Harish Salve senior counsel for RIL in Bombay High Court on Thursday. Mukesh Ambani and brother Anil Ambani are slugging it out in the court over supply of natural gas from RIL’s eastern offshore Krishna-Godavari gas fields.
According to a June 2005 agreement between the Ambani brothers, gas from RIL’s KG basin fields would be allocated to Reliance Energy for its upcoming power plants. As per the agreement — which has never been made a public document — Reliance Energy would have the right to 28 million cubic metres of gas from KG basin.
RIL counsel Salve dubbed the agreement between the brothers as a ‘ghost MoU’ (as no one has seen it) and said. A division bench comprising Justice J N Patel and K K Tated is hearing the gas dispute case between billionaire brothers.
RIL has already invested Rs 30,000 crore for developing its assets in Krishna Godavari basin and wants to trade gas at the government-approved price of $4.2 per million British thermal unit (mBtu), which has been arrived at through an arm’s length formula. Salve said, trading at this price will help RIL recover cost and run the business profitable.
Salve, during earlier court case hearings, has told the court that the MoU cannot be taken as the basis for allocation of gas to Anil Ambani promoted Reliance Natural Resources (RNRL). He added that RIL fears RNRL would trade the gas-- that it gets from RIL at cheap price-- to a third party since it does not have its power plant in place.
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"RIL needs government's prior approval regarding whom to sell the gas to," Salve contended. The lease given to RIL is for 25 years and ends in 2025. The gas reserve will run out within this time period. RIL is likely to recover its cost towards the project within the next three to four years, Salve added.
Salve will continue to argue on the case on August 5, when the case will come up for further hearing.