RNRL affidavit again attacks RIL, ministry

Anil Ambani-controlled Reliance Natural Resources Ltd (RNRL) today renewed its attack in the Supreme Court on the Ministry of Petroleum and Natural Gas and Mukesh Ambani-controlled Reliance Industries Ltd (RIL) on the gas supply dispute. It called the government’s stand “dishonest and collusive”.

According to an affidavit filed by RNRL, which is soon to start its arguments in the five appeals before the court, RIL has entered into 40 production sharing contracts in respect of 40 blocks with the government in the Krishna-Godavari (KG) basin, covering an area of 400,000 sq km. While the present discoveries come from an area of just 339 sq km.

It further says the proposed contract to supply gas from RIL to RNRL and also NTPC constitutes less than one per cent of the gas exploration available to RIL.

Further, RIL’s “inflated” capital expenditure will result in a per unit cost of only $1.28, thus making a huge profit even at the $2.34 per unit of supply which RNRL is demanding and RIL refuses.

RNRL has also challenged the legal stand of the government in the appeals, and alleged several procedural improprieties by the ministry during the earlier Bombay High Court proceedings.

Its full arguments will start after RIL concludes its arguments, which entered the eighth day today.

The extended arguments became necessary because Justice R V Raveendran recused himself midway, confessing a possible conflict of interest. The present hearing is before a bench of Chief Justice K G Balakrishnan and judges B Sudershan Reddy and P Sathasivam.

The whole day today was taken by RIL counsel Harish Salve in recapitulating the arguments already made before the earlier bench on why RIL could only supply gas at the price set by the government, not below as insisted on by RNRL in an earlier agreement. He reiterated that RIL had to follow government policy once it came into force, though earlier it presumed that it would have market freedom. RNRL had canvassed for a government policy and now it could not take a contrary stand, Salve said.

About the phrase, “suitable arrangement” in the scheme agreed between the two companies, the counsel said that whatever it be, it should be subject to government approval.

Neither party can decide what is suitable, because what is suitable for one may not be so to the other. Since the gas was with RIL and it was the contractor, it was its right to say what is suitable from the business point of view, as the allocation of the goods and valuation was with the government. RNRL cannot dictate a lower price quoting a family arrangement, as RIL might be losing if it had to subsidise gas if certain calculations went wrong.

Salve reiterated that the shareholders had not agreed to the family arrangement. If it was placed before a general body meeting and the consequences were explained to them as envisaged in Sections 391 and 394 of the Companies Act, they would not have agreed to the scheme. It was the privilege of the shareholders to say what is a “suitable arrangement”. Two brothers cannot decide what is good for the shareholders. It also required the approval of the court.

Counsel further said that it was the power business of the erstwhile Reliance group which was demerged, and not the gas business.

Reading out the scheme, he asserted that gas, which was in short supply, was meant to produce power. Gas was not a commodity to be sold as such; it was meant to be used as fuel and for no other purpose. RIL will continue its arguments on Wednesday.