RNRL Coverages

MUMBAI: The final hearing of Reliance Industries (RIL) and Reliance Natural Resources (RNRL) ended in the Bombay High Court on Thursday with exciting arguments and counter arguments before Justice Anup Mohta. The judge asked counsels of both companies to give their submissions in writing in a week, following which the judgment may be pronounced.

RNRL counsel Mukul Rohtagi completed his arguments seeking a firm supply of gas (28 mmscmd or 40 mmscmd as the case may be) for 17 years at $2.34 per mmbtu as agreed in the demerger scheme. In his arguments in the rejoinder, Mr Rohtagi said that RIL has to supply gas to RNRL not only from KG-D6 field but from all its fields under exploration and development.

“RIL has mischievously designed the entire agreement in a manner that gas can never be supplied to RNRL so that the power plants can never be set up,” he added.

RIL’s counsel Harish Salve started his arguments by stating that the breach of agreement is a hoax and sought RNRL’s petition to be dismissed. According to Mr Salve, RIL has only 4.4 trillion cubic feet (TCF) of certified proven reserves (CPR) as of today and is not in a position to enter into agreement to supply 28 million metric standard cubic meters per day (mmscmd) of gas for 17 years.

Mr Salve said that even if RIL produce gas at the rate of 28 mmscmd, the reserves would be exhausted in four years time. If proven reserves of 12 TCF are to be considered, half of it will go to government and its partner leaving RIL with only 6.14 TCF of gas.

In the second case, if the NTPC contract does not materialise, and RIL agrees to sell entire 40 mmscmd of gas to RNRL for 17 years, RIL will have a deficit of 7 TCF of gas. If that happens, RIL will have to show $120 billion or Rs 60,000 crore as contingent liability in its balance sheet because of the liability clause. Citing the above examples Mr Salve suggested that the tenure and quantity of gas supply to be left open and determined as and when CPR goes up.

Countering this statement, Mr Rohtagi said, “RIL’s claim that based on CPR, it does not have adequate gas to supply 40 mmscmd of gas to NTPC and RNRL is shocking. This claim is totally false, and contradictory to the development plan and various letters filed by RIL with the government, which shows capability to produce gas upto 120 mmscmd.” If RIL does not have the availability of gas committed to NTPC and RNRL, then how can RIL take approval from government for capex of $8.8 billion, Mr Rohatgi asked.

On pricing, Mr Salve argued that if RIL agrees to sell gas to RNRL at $2.34 per mmbtu against market determined prices, RIL will lose $8 billion. “If I (RIL) sells gas to my brother (RNRL) at $2.34 per mmbtu and RNRL sells it to its power plants at $5 per mmbtu, a PIL (public interest litigation) will be filed saying that Ambani brothers are taking India for a ride,” Mr Salve argued.