Government seeks dual pricing for RIL's KG gas

13 January 2009

In a move that may help resolve the ongoing battle between Mukesh Ambani-owned Reliance Industries Limited (RIL) and Anil Ambani owned Reliance Natural Resources Limited (RNRL) the division bench of the Bombay High Court yesterday said that it could modify the injunction that prevents Reliance Industries from selling gas to third parties.

Earleir there was a stay on Reliance Industries for selling the gas of the KG basin to any party other than government owned entities.

Reliance Industries is fighting two court cases with regards to the use and pricing of the KG gas. The first case is with RNRL and other with NTPC.

The gas sale master agreement between RIL and RNRL states that RNRL is entitled to be supplied 28 million cubic metres of gas a day from the Krishna-Godvari (KG) basin at a price of $2.34 per million British thermal unit (mBtu) for a period of 17 years.

However, RIL has refused to supply gas at that price for that period.  RIL's counsel Harish Salve said that the company is ready to supply the gas to RNRL at government-approved price of $4.20 per mBtu.

In a parallel case RIL also has an agreement to sell gas to the government owned NTPC. While the government has stated that the gas be sold at $4.20 to third parties including RNRL, it want lower pricing for government owned entities such as NTPC and fertiliser companies.