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| Govt to lose Rs 22,600 cr if RNRL demands are met: RIL to SC |
| Press Trust of India / New Delhi Oct 11, 2009, 14:04 IST |
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Mukesh Ambani group firm Reliance Industries (RIL) told the Supreme Court that the government will lose Rs 22,600 crore in revenues if Reliance Natural Resource (RNRL) was supplied gas at a price of $2.34 per mmBtu, while the Anil Ambani group firm will make a windfall profit of Rs 23,800 crore.
In its reply to the RNRL’s special leave petition (SLP), RIL said that RNRL was “misleading” the court by alleging that it will gain Rs 50,000 crore as the difference in revenue between the governmnet approved price of $4.2 and $2.34 for 28 mmscmd of gas over 17 years.
In the affidavit, RIL said that the life of gas field was 12 years and Anil Ambani group can receive gas for maximum of eight years as it would take a minimum of three years to set up the power plant at Dadri in Uttar Pradesh.
“The dfference in net revenue (net of capex and opex) adjusted for eight years (even on the erroneous basis of RNRL) works out to be approximateley Rs 23,800 crore,” it stated.
Out of this Rs 23,800 crore, approximately 95 per cent (Rs 22,000 crore), which included royalty, taxes and profit share, would be lost by the government and around 5 per cent i.e, Rs 1,200 crore would be lost by contractors (RIL and NIKO).
“If RIL were to sell 28 mmscmd of gas to RNRL at $2,34 mmBtu for 17 years while the government adopted $4.2 for purpose of valuation (for tax and other levies), RIL would incur a cash loss of Rs 50,000 crore. This would result in RIL’s not even recovering its investments,” it further added.
“... all the actions of RNRL are clearly motivated by commercial greed, with the goal of pocketing trading profits (by selling gas to the power plants of Reliance Energy and RPPL) far in excess of the alleged Rs 50,000 crore without making any effort or investment, all to the detriment of the government and the common man,” RIL said in its reply.
Refuting RNRL’s stand, RIL said that the gas supply under the MoU of 2005 was conditional to the government approval and the government had in July 2006 rejected the price of $2.34 per mmBtu as not being on arms length.
Besides, RIL reiterated that the family MoU was not binding on it as its board had not approved it.
“RIL’s shareholders and creditors knew nothing of the contents of the MoU. The MoU was not referred to in the scheme (demerger Reliance empire) document. Nor is it referred to in the explanatory circulars. When the Bombay High Court sanctioned the scheme, it knew nothing of the contents of the MoU,” RIL stated.
Denying RNRL’s argument that the high court had sanctioned the entire demerger scheme, including its formation, RIL said that the demerger was not in any way linked to the gas-supply agreement.
RIL further argued that if RNRL’s demands for gas supply were acceded, then it require RIL to breach the Production Sharing Contract which stipulated that the contractor can sell gas only at government approved price.
“One of the consequences of the breach of the PSC could be its termination, and any such breach would thus place in jeopardy the entire investment made by RIL,” the affidavit stated, adding that RIL being the contractor to the government had an obligation to sell all the gas at arms length price and can’t create a preferential class of customers.
Meanwhile, RNRL shareholders and RIL shareholders have also moved the apex court seeking to be made parties in the gas supply dispute between Ambani brothers.
A Supreme Court three-judge bench will commence hearing in the gas supply dispute case on 20 October.
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