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More fuel poured into gas fire

Mumbai, July 30: The battle between the Ambani brothers over a fast-souring gas supply agreement escalated today with Anil Ambani-owned Reliance Natural Resources Ltd (RNRL) accusing Reliance Industries ' the flagship of Mukesh Ambani's empire ' of deliberately misleading the petroleum ministry in a wily effort to renege on the deal.

Last week, the ministry of petroleum and natural gas rejected the sale of gas from Reliance’s gasfields in the Krishna Godavari basin at a discounted price of $2.34 per million British thermal unit (mBtu) to RNRL on the ground that it violated the principles of arm’s length pricing.

RNRL claimed that the deal between RIL and the Anil Ambani group had been drafted two years ago ' about the time that RIL was negotiating a similar agreement with the state-owned National Thermal Power Corporation (NTPC).

The Anil Ambani faction claimed that RIL had deliberately suppressed the fact that the deal had been negotiated in the first half of 2004, long before the blowout in crude oil prices sent all petro-product prices through the roof.

Reliance Industries has already informed NTPC that it won’t be able to supply the gas at the price that it offered during a bidding process two years ago. NTPC has since hauled RIL to the Mumbai high court and a ruling on that dispute is expected on August 31.

Alleging that the Mukesh Ambani flagship was not divulging the full facts to the ministry with “malafide and dishonest intentions”, RNRL said RIL’s attempt to mislead the government was solely motivated by its “selfish desire” to secure a higher price for gas.

RNRL, however, did not reveal the name of the company with whom RIL entered the gas supply agreement. This is interesting as RNRL (earlier known as Global Fuel Management Services) was formed only after the demerger of the Reliance empire in January this year.

According to RNRL, the price at which it is supposed to receive the gas was fixed in 2004 at the same time and on the same basis as the NTPC price, which was discovered through an open and transparent international competitive bidding process.

RNRL also charged RIL with deliberately concealing the fact that the gas supply agreement was based on an arms’ length transaction made in 2004.

It added that the transaction had since become a formal and integral part of the demerger scheme approved by RIL’s 2 million shareholders and Bombay High Court for which all records are available in the public domain.

“The precious gas fields are the natural assets of India and belong to the government and people of India. These resources must be used only for the best interests of the entire nation,” RNRL said in a statement.

The government collects royalty on commercial exploitation of gas fields and the extent of recovery is indexed to the gas sale price.

RIL officials were not available to respond to the latest charges in what is turning out to be a never-ending slug-fest between the two Ambani brothers.

In defence of its position, the ministry has argued that gas from Panna-Mukta gas field (in which Reliance Industries has a stake) is being sold to state-owned GAIL at a price of $4.80 per mBtu. It claimed that the difference in the gas prices for GAIL and RNRL was unacceptable.

Sources in the Anil camp alleged that the Mukesh Ambani camp was creating hurdles to dishonour the gas supply agreement.

They charged that the Mukesh Ambani group was solely responsible for delaying Reliance Energy’s large power projects of national importance. RIL was to supply natural gas to RNRL which would later flow to Reliance Energy Ltd’s 7,480-mw Dadri power project.

The Anil camp held out a dark threat when it said if the gas supply agreement was scuppered, areas in north India, including New Delhi, would have to face the prospect of power cuts and a sharp rise in electricity rates.

Reliance Energy has the rights to distribute power in two of the three zones that were carved out when Delhi Vidyut Board (DVB) was privatised in July 2002.

On July 26, the petroleum ministry rejected the price of $2.34 per mBtu spelt out in the deal between RIL and RNRL, arguing that it would result in an enormous loss to the government exchequer.

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