Government can't alter MoU terms, RNRL tells SC
10 September 2009
Anil Ambani-controlled Reliance Natural Resources (RNRL) yesterday told the Supreme Court in an affidavit that that the government has no leeway to alter the utilisation of gas produced by elder brother Mukesh's Reliance Industries Ltd from its Krishna-Godavari block, or fix its price with regard to the RNRL's disputed contract with RIL.
The supply of gas from the KG basin by RIL to RNRL in accordance with the family MoU of 2005 is an integral part of the de-merger of the family business, the affidavit said, adding that the production-sharing contract between RIL and the government gave RIL freedom to price and market gas.
''It is submitted that the effective de-merger of the business between the company and its transferee has not taken place. It is well within the jurisdiction of the court to see that the business is actually de-merged. The business in question is the business of gas supply. If the actual gas supply does not take place between RIL and RNRL, there is no de-merger,'' said RNRL in its affidavit, filed through its counsel Mahesh Agrawal.
According to the memorandum of understanding signed in 2005 as part of a settlement which divided the Reliance industrial empire, RIL is to supply 28 million standard cubic metres per day of gas to RNRL at $2.34 per million British thermal units. This price is 44 per cent lower than the $4.20 per mmBtu fixed later by the government for sale of gas by RIL to some power and fertiliser companies.
RNRL said, ''The scheme contemplates that suitable arrangement be put in place for supply of gas. Unless a suitable arrangement is executed, the scheme is not fully implemented, and the de-merger is not complete.''
It added that the scheme of de-merger was sanctioned by the court, as a result of which the gas-based energy undertaking was de-merged from RIL to RNRL. As a ''natural corollary'', RNRL also countered the union government's plea that its diktats on the production-sharing contract had primacy over a family MoU.