Ambani family pact can’t override Centre’s right: fertiliser secretary

Press Trust of India
Posted: Tuesday, Jun 30, 2009 at 0311 hrs IST
Updated: Tuesday, Jun 30, 2009 at 0311 hrs IST

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New Delhi: The Ambanis’ family pact, which divided the gas output from the Krishna-Godavari basin D6 field between brothers Mukesh and Anil, cannot override the Centre’s right to formulate gas utilisation policies aimed at public interest, the fertiliser ministry has said. Urea plants were given top priority in the sale of natural gas from Reliance Industries’ D6 but the June 15 order by the Bombay High Court had paved the way for 70% of the initial volumes to come RNRL’s way.

“The gas in question has been allocated (to fertiliser, power and other sectors), based on the Centre’s authority and rights under the Production Sharing Contract (for D6), aimed at regulating gas marketing and allowing their orderly growth,” fertiliser secretary Atul Chaturvedi wrote to his counterpart in the petroleum ministry, RS Pandey, on June 24. “Our understanding is that any family settlement would not override the sovereign right of the Centre to formulate policies aimed at larger public interest,” he added.

Twelve urea manufacturing companies were allocated 14.97 million cubic meter per day, when the government prioritised the sale of the initial 40 mmcmd from D6, primarily between fertiliser and power companies, based on food security and meeting energy deficit.

But the Bombay High Court, on June 15, had ruled that RIL should honour its commitment to the family split agreement and supply 28 mmcmd gas to RNRL. The price in the NTPC tender was $2.34 per million British thermal unit, 44% lower than the government-approved rate of $4.20 per mmBtu. Also, RIL and RNRL were given a month’s time to work out the firm’s gas volumes, price, timelines and other commercial details for sourcing the fuel from Krishna-Godavari basin fields.

RIL can produce 37 mmcmd of gas per day from the D6 fields. But, since a few power and fertiliser companies were not drawing their alloted quantities, it was producing only 28 mmcmd.

In the MoU that split Dhirubhai Ambani’s business empire, the Mukesh Ambani-run firm had promised to supply 28 mmcmd to power plants of the group run by his younger brother, for 17 years. The price in the MoU was the same as the one RIL had bid for, in a 2004 NTPC tender. RIL had bid to supply 12 mmscmd gas to NTPC at $2.34 per mmBtu but a gas sales and purchase agreement could not be signed because of disputes.

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