Mukesh Ambani-led Reliance Industries Limited has told the Supreme Court that it cannot sell natural gas to Anil Ambani group firm Reliance Natural Resources Limited at a price 44 per cent lower than the government-approved rate and said that it would incur huge cash losses if it is forced to do so.
An RIL spokesperson said that the company has filed its reply to the government's petition on the gas dispute.
In the petition, the company accepted the oil ministry's contention that natural gas from the KG-D6 fields can only be sold to users identified by the government.
The company said gas cannot be sold to different consumers at different rates and there cannot be different prices for sale to consumers and for valuation purposes.
RIL expressed its inability to supply gas at $2.34 per mmBtu (a rate 44 per cent lower than government fixed price of $4.20 per mmBtu) to Anil Ambani Group firm RNRL, which had taken the Mukesh Ambani firm to Supreme Court seeking gas for group power plants in accordance with a 2005 family agreement.
It said the commitment under the 2005 family memorandum of understanding, to supply 28 million standard cubic meters per day to RNRL, was subject to government approval.
On the Bombay high court directing RIL to meet the commitment made in the 2005, RIL said: "The order of the division bench (of Bombay high court) has put RIL in a position of having to breach the production sharing contract and violate the government's policies."
Going against the PSC would jeopardise RIL's huge investment of Rs 38,000 crore in gas exploration and development, the company contended.
"If forced to sell gas at a price significantly lower than the government-approved price -- which RIL said it cannot do under the PSC, RIL would incur huge losses, making the whole project unviable," the reply said.
The government in its SLP stated that the two brothers had tried to divide national resource through a private agreement and the national economy would be held hostage to their benevolence.
"RIL has, at no stage, attempted to act to the detriment, or contrary to the interest, of the Union of India or apportion, much less appropriate, any property or asset of the Union of India to itself," the affidavit said.
"RIL is selling KG-D6 gas strictly in accordance with the allocations made by the government and at the government-approved price."
The company said its agreement with RNRL to sale of gas was subject to government approvals.
"The Gas Sales Master Agreement provided that all gas to be produced from existing and future discoveries from the blocks awarded to RIL as on June 18, 2005 was to be shared between RIL and RNRL in the ratio of 60:40, which was also subject to government approvals," RIL said.
RIL said it had submitted the $2.34 per mmBtu price to government for approval in April 2006 but was rejected. "At all relevant times, RIL has consistently maintained that it can sell gas only at the price determined in accordance with the formula approved by the government."
The company said it had entered into agreements with 12 customers for KG-D6 prior to promulgation of the government's gas pricing and Gas Utilisation Policy. The agreements were subject to government approval and were modified following the approval of the $4.20 per mmBtu gas price and allocation of gas under the Gas Utilisation Policy.
"Tata Power and GAIL (with whom RIL had signed agreements) are not being supplied gas as a result of not receiving allocation from the government under the Gas Utilisation Policy," RIL said.
Image: Mukesh Ambani
