Will incur heavy loss if K-G gas is not sold to priority customers: Govt

The government will incur a loss of Rs 75,000 crore if the gas from Reliance Industries Ltd’s (RIL’s) D-6 block in the Krishna-Godavari basin is not sold to priority customers like fertiliser and power sectors, additional solicitor general Vivek Tankha told the Supreme Court today.

Tankha and Mohan Parasaran, both additional solicitors-general, are government counsels in the gas supply dispute between the Ambani brothers. The government, through an Empowered Group of Ministers (EGoM), has allocated 90 million standard cubic metres a day (mscmd) of gas from the D-6 block to priority customers like power and fertiliser sectors, liquefied petrol gas extraction units, city gas distribution projects, petrochemical plants, steel units and refineries.

The government’s counsel based his arguments on the wide-spread impact the D-6 gas will have on the country’s economy. Tankha said the gas supplies from D-6, which started production in April, will help produce 7.6 million tonnes per year of urea and help save the government Rs 4,000 crore worth of subsidy annually. Similarly, D-6 gas will help generate 10,000 Mw of power, resulting in about Rs 11,000 crore savings per year, Rs 1,500 crore annual savings through city gas projects, Rs 1,000 crore savings to steel sector and Rs 3,000 crore to the refineries.

Mukesh Ambani-led RIL and Anil Ambani’s RNRL are locked in a legal battle over supply of gas, based on differing interpretations of validity of a memorandum of understanding reached between the two brothers in 2005 at the time they split their father’s industrial legacy.

The family pact said RIL would supply 28 mscmd of D-6 gas to RNRL for 17 years at $2.34 per mBtu, which is 44 per cent lower than the later government-approved price of $4.2 per mBtu. The government is opposed to the portion of the Ambani family pact that divides the entire gas from D-6 Block between RIL and RNRL.