INDIA BUSINESS WORLD - JUNE 2006
THE MONTH THAT WAS...

SIBLING RIVALRY II: MUKESH'S HARYANA SEZ GETS ANIL'S GOAT

  IT WAS like a ticking time bomb set to go off. Round II of the Ambani battle has begun and it may well turn out to be as ugly and painful as Round I — the trigger being the non-competing clause between the two Ambani brothers that is now alleged to have been violated by Reliance Industries (RIL).

The Anil Dhirubhai Ambani Group (ADAG) has shot off a letter to the RIL board and Reliance Ventures, pointing out violation of the non-competing clause between the groups.

A copy of this letter has also been sent to the Haryana State Industrial Development Corporation, an equity partner in the RIL SEZ in Haryana.

ADAG sources said RIL's plans to develop a 2,000 mw power plant in SEZ is a clear violation of the noncompeting clause, which is valid for 10 years from the date of signing.

The non-compete clause particularly mentions the power sector, telecom and financial services as the areas reserved for ADAG and RIL's plans to develop a large power plant violates the agreement, sources said. An ADAG spokesman said: “We confirm sending the letter but have no further comments.”

“Reliance has fulfilled all its commitments and obligations. It will follow the same principles in the future as well,”-a Reliance spokesperson. But if RIL is violating the non-compete clause by investing in power, which they claim to be ‘incidental investments', ADAG may also need to do some soul searching.

The group is in talks with global and domestic oil majors and is planning to bid in the NELP rounds. ADAG has bought data and has shown interest in participating in the exploration and production bidding round.

Also, the company has put in a formal application to take up city gas distribution and has sought a formal licence. The upstream gas business is an area earmarked for the RIL group and ADAG's plans to distribute gas raises similar questions on non-compete obligations. Though RIL may want to describe the proposed power project as ‘incidental' or a captive power plant, questions may be raised as to whether this could be defined as captive if it were selling power to commercial establishments or other consumers within SEZ. RIL does have other captive plants in Jamnagar , Hazira and Patalganga, but the power generated at these plants are mainly used for the industrial plants put up by RIL.