Reliance Natural Resources (RNRL) Chairman Anil Ambani today lashed out at the petroleum ministry and Reliance Industries (RIL), controlled by his brother Mukesh Ambani, for their role in the Krishna-Godavari (KG) basin gas pricing controversy.
In his first open attack, Ambani said the ministry's recent attempts to portray the gas dispute as a private family affair was aimed at bailing out RIL and dissuade it from honouring its commitment to RNRL, he told the shareholders of RNRL at the annual general meeting (AGM) in Mumbai today.
“The gas price of $2.34 per unit was not decided by two brothers on the dinner table,” Ambani said, adding the price was based on the prevailing global oil scenario and legitimately approved by the RIL board in 2005.
Ambani made little effort to hide his emotions. Tears welled up when he talked about his late father Dhirubhai Ambani and Mukesh.
His voice broke twice when he described how his father taught him the element of “trust” in business. His son, who was in the audience, was also visibly moved by the speech.
Questioning the basis of the ministry's argument, the younger Ambani said in the first Rs 50,000 crore worth of production from the KG D-6, the government’s share would be just Rs 500 crore and the rest would go to the private developer. RIL has so far explored only 4 per cent of the total KG D-6. So the question of the government losing out did not arise.
Disputing the argument that the corporate agreement between RIL and RNRL amounted to a private division of sovereign national assets, he said, “the sovereign ownership issue is a bogey to bail out RIL and help them renege on their contractual commitments. We are not claiming ownership of gas under the production sharing contract (PSC). We are claiming gas only from RIL’s lawful share or its rightful entitlement of production of gas under the PSC,” said an emotionally-charged up Ambani, amidst chants of “hum tumhaare saath hai” by a section of the shareholders.
RNRL’s claims, he said, were entirely in line with the government’s stand on the floor of Parliament, not once or twice, but on at least 15 different occasions in the past three years.
Both Petroleum Minister Murli Deora and an RIL spokesperson declined to comment on Ambani’s comments, saying the matter was sub-judice.
Turning his attention to RIL, Ambani said the company’s “greed to earn super-normal profits” would force the country to lose over Rs 30,000 crore. Power consumers also stand to pay an additional one rupee per unit on the power produced from the Krishna-Godavari gas basin, he said.
Despite the binding commercial agreement between RIL and RNRL for the supply of gas, “it was unfortunate that RIL has tried every trick in the book –and apparently several outside the book -- to back out of its solemn, legal and contractual obligations”, he said.
Ambani alleged that the capital expenditure for KG D-6 was approved by a management committee of four -- two junior officials of the ministry of petroleum and Director General of Hydrocarbons (DGH) and two representatives of the contractor, which is RIL.
The capex for development and exploration of Rs 45,000 crore is 33 per cent of India’s annual defence expenditure. This was approved despite the fact that each and every expenditure of Rs 150 crore or more made by any arm of the government goes to the Cabinet committee on Economic Affairs for approval.
“The budgeted capex for the first 40 million metric standard cubic meter per day (mmsmd) of KG D-6 was Rs12,000 crore and for the next 40 mmscmd was Rs 20,000 in 2004. This was revised to Rs 25,000 crore for the first 40 mmscmd and for the remaining to Rs 45,000 crore, thus causing the government to lose Rs 30,000 crore.”, he said.
He also said the ministry of petroleum involved in the RIL-RNRL dispute overriding a ministry of law and justice directive on November 3, 2008 stating that all sensitive written submissions and affidavits in the Supreme Court should be vetted by it before they are submitted to the courts.
Ambani also said the transport costs for KG gas was one of the highest in the world at 30 per cent of the basic gas price.
“When I was the vice chairman and managing director of RIL till 2005, Reliance Gas Transportation Infrastructure Limited (RGTIL) was a 100 per cent subsidiary of RIL. Now it is a privately owned by the company of the promoters of RIL, sold off for Rs 5 lakh,” he said, demanding that the regulatory agencies should examine the matter.
Commenting on government’s role in fixing the price for KG D-6, he said even RIL’s own international partner, Niko Resources, had written to the government saying the petroleum ministry had no powers to fix the sale price under the PSC.
Other global petroleum industry majors, including BP and Shell, have made a similar formal submission to the government, arguing that any attempt to fix the price would violate the market freedom provided under the PSC.
RIL had opposed this position earlier, but now, for obvious reasons, is finding great virtue in toeing the petroleum ministry’s line, Ambani said.
PTI adds: The petroleum ministry warned that free pricing advocacy by Anil Ambani in the gas dispute would make the country “subservient” to RIL and said it had moved the apex court to protect national property from being appropriated in a family deal.
Petroleum Secretary R S Pandey said: “If 60 per cent gas from KG-D6 and other blocks is given to RIL as per the free pricing Anil Ambani advocates, the gas can be used in the company’s petrochemical plants and refinery at $1 per mBtu and to the rest at higher prices.”
