The Union government has told the Supreme Court that the rights and obligations of NTPC and RIL could not be regarded as similar in status to the private arrangement between RIL and RNRL. In an affidavit filed yesterday in the appeals by the Ambani brothers on their gas dispute, the government stressed that NTPC “is not only a public sector undertaking but the process involved for price determination in the case of NTPC gas was by international competitive bidding.”
This stand is different from what Anil Ambani-controlled RNRL argued today before the bench headed by Chief Justice K G Balakrishnan. According to its counsel, Mukul Rohtagi, the rate of $2.34 a unit at which NTPC was offered gas should be the benchmark for RNRL, too. This was also the understanding in the agreement within the Ambani family on the matter, which RNRL accuses RIL of reneging on.
The government clarified in its statement that the price offered by the contractor to the NTPC will require scrutiny and approval of the government under the Production Sharing Contract (PSC). “The central government will take an appropriate decision in the case of NTPC as and when a need arises. Such a decision based on public interest, if in favour of NTPC, cannot be termed as discriminatory or arbitrary,” says the affidavit of the ministry of petroleum and natural gas.
It may be recalled that the dispute between NTPC and RIL is currently in the Bombay high court and there is no early decision in sight. The RNRL counsel said Mukesh Ambani-controlled RIL has got a contract for exploration of gas in 400,000 acres, which it can go on doing for 100 years. Only two wells are operating and RIL is offering only a miniscule part of the production for 17 years to RNRL.
According to the Director General of Hydrocarbons, the cost of production was $1.28, and RIL itself put it at $1.10 at one time. Even at $2.34, RIL can make a huge profit for many years to come. Therefore, RIL’s plea that it would lose if gas is sold at the latter rate and the company would go under by subsidising the price for its consumers is wrong. RIL will only lose some profit margin, Rohtagi said.
In fact, RNRL and its shareholders would face a grim fate if the memorandum of understanding is annulled, counsel argued. The court has wide powers under Section 392 of the Companies Act to order implementation of a scheme or amend it to protect the company and its shareholders.
When the judges asked the RNRL counsel what his client’s company would do with the gas when the Dadri plant for which it was meant has not even come up, he replied that the plant was the dream of Dhirubhai Ambani, father of the two warring brothers, who died in 2002, and the project was not going forward because of litigation and obstacles created by RIL. Banks were not extending loans. Counsel said the delay in the project should be compensated by giving it three more years to start operations and the gas supply contract should also be extended equitably.
Rohtagi told the court that if RNRL had to buy power from RIL at the government-fixed rate of $4.2 (RIL says it can’t supply any gas below this, as it is bound by the state decision), electricity from the Dadri plant to the capital will cost double the present price and even go up to Rs 15 a unit. There will be a furore from Delhi consumers. If the government and RIL really cared for public interest, the price should be fixed lower.
The hearing in the Ambani brothers’ appeals against the Bombay high court judgment has been on for three weeks. While RNRL is seeking gas from RIL at $ 2.34 per unit, RIL says it cannot honour the commitment made in the family agreement due to the government's later decisions. The government has also appealed against the HC judgment, saying that all natural resources like gas was its property and it could not be subjected to a family arrangement.
