Anil, Mukesh in court over gas

Reliance Natural Resources Ltd (RNRL), the gas supply outfit of the Anil Ambani group, on Wednesday dragged the Mukesh Ambani-controlled Reliance Industries to the Bombay High Court, alleging non-execution of a gas supply agreement between them.

The Anil Ambani firm has sought legal recourse three months after the petroleum ministry rejected the gas supply agreement between the two groups on the ground that it had not been "derived on the basis of competitive arms-length sales in the region for similar sales under similar conditions." The ministry had added that the deal did not meet the production sharing criteria laid down by the government.

RNRL filed a petition in the high court, praying implementation of the demerger agreement. The RNRL spokesperson said an application had been filed requesting the court to direct Reliance Industries to implement its December 2005 order.

Reliance had sought the high court's approval for the demerger scheme, which included the gas supply agreement, in September 2005 and the court had given the go-ahead in December.

A Reliance Industries spokesperson said: "Questions relating to the supply of gas to the Dadri project have been in the public domain for some time. Since the issue has now become sub judice, we have been advised not to comment on the merits of the matter."

According to him, Reliance Industries will place the true and correct facts before the high court.

Reliance Industries, according to the agreement, was to supply up to 28 mmscd (million standard cubic metres per day) gas to RNRL. Reliance sells gas from its Panna/Mukta and Tapti fields at $4.75 per million metric British thermal unit (mmbtu) to power companies.

This ministry's decision had impacted Reliance Energy's proposed 7480 Mw Dadri power project, which is supposed to draw heavily on gas procured at a subsidised rate from Reliance Industries.

According to the gas supply agreement, Reliance Industries was to sell gas at $3.18 per mmbtu to RNRL, a considerable discount to the prevailing market price.

This price includes marketing and risk management charges of $ 0.12 per mmbtu and a transportation cost of $0.72 per mmbtu, but does not include taxes and duties.

Reliance Industries also failed to receive no-objection from Niko Resources, its partner in developing the D-6 block of the Krishna-Godavari basin, from where the gas was proposed to be supplied to RNRL. Niko holds 10 per cent in the block.