INDIA BUSINESS WORLD - JUNE - JULY - 2007
The Month that was ...

BOMBAY HIGH COURT SLAPS CURBS ON RIL'S KG GAS SALES

THE Bombay High Court has ruled that Reliance Industries, India's largest private sector company, cannot sell gas produced from one of its prime blocks in the Krishna-Godavari basin to any third party other than Anil Ambani's Reliance Natural Resources (RNRL) and NTPC.

In an interim order on a petition filed by RNRL, the high court has said the 81.6 million cubic metres of gas per day (mmscmd) is to be earmarked for RNRL, NTPC or RIL's captive use for the next eight years.

However, the central government is likely to challenge the decision in the Supreme Court. "The government is the owner of the gas blocks, and all hydrocarbon assets belong to it. RIL in this case is only an operator and RNRL or NTPC potential bulk consumers. We cannot allow the gas to lie idle at a time when we are paying heavily to meet our energy requirements," an official said.

This order is significant for several reasons. It means that RIL, which had called for competitive bids last week for selling the gas to power and fertiliser companies, cannot proceed with its plans. The bids had generated a price of $4.58 per mmBtu, which is nearly double the price at which RIL had originally agreed to sell to RNRL and NTPC. According to calculations by ETIG, RIL could lose up to $4 billion if it is forced to sell the entire quantity at a lower price (see page 9).