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Ambani battle over gas cries for consistent government policy (Comment)

Category :India Sub Category :National,Business
2009-08-30 00:00:00
   Views : 472

The feud between the two Ambani brothers - Mukesh and Anil - seems to be an unending saga on the lines of television soap operas, with the story becoming increasingly complex by the day and the number of characters involved in each episode rising rapidly.

Initially, it was just a row between the companies controlled by the two brothers, with Anil Ambani's Reliance Natural Resources seeking gas supplies at $2.34 per unit from the fields of the Krishna-Godavari basin, off the Andhra Pradesh coast, that were awarded to Mukesh Ambani's Reliance Industries.

It has now expanded to include the petroleum and power ministries, state-run power utility NTPC and various other power and fertiliser companies that urgently need natural gas supplies at a reasonable price.

The basic issue continues to be the conflict over the pricing of gas to be supplied by Reliance Industries to the Dadri power plant owned by the Anil Ambani group. The original pact between the two companies envisaged a price of $2.34 dollars per unit for 17 years, which was also upheld by the Bombay High Court.

But Reliance Industries says that it can only supply the same at $4.20 dollars per unit, claiming this is the price approved by the government. The fight has now gone to the Supreme Court, but the problem is that the government - which had earlier taken a particular view on the pricing - has now altered its stance.

This is evidently because the petroleum ministry failed to hold prior consultations with the power ministry on the subject. And after having argued in favour of continuing with higher prices approved by the government, it discovered that Reliance Industries had also committed to supplying gas at the same lower price to the NTPC.

The government, thus, had to modify its stance to support the public sector company, which has argued that Reliance Industries must fulfill the commitment to the lower gas price, based on an global tender.

Clearly, this is a case of one hand of the government not knowing what the other hand is doing. The petroleum ministry is now in the unenviable position of having to alter its stance before the apex court in order to ensure that the NTPC is given the benefit of a lower price.

This is bound to strengthen the case of the Anil Ambani group, which is similarly seeking that the original contractual obligations made by Reliance Industries should be fulfilled. The fact is the oil ministry seems to have acted in haste without consulting other ministries, which are equally involved in the natural gas sector but as consumers.

While it is rumoured that Petroleum Minister Murli Deora is close to Mukesh Ambani, in this case it was felt his ministry was viewing the legal battle within the larger context of natural gas being a sovereign natural resource.

It had, thus, taken the stance that the government had the authority to decide on pricing issues.




Author :Sushma Ramachandran



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