Reliance Industries (RIL) led by Mukesh Ambani has signed a revised gas supply agreement with Reliance Natural Resources (RNRL) promoted by younger brother Anil Ambani, paving the way for the government to allocate gas for ADAG?s power plants.
RIL said in a statement: ?Pursuant to and in compliance with the directions and orders contained in the judgment of Hon?ble Supreme Court of India delivered on 7th May 2010, RIL and RNRL have today signed a gas supply master agreement. The said gas supply master agreement is compliant with the gas utilisation policy and EGoM decisions.?
Shares of both RIL and RNRL gained on Friday, while the benchmark 30-share Sensex fell 0.88%. RIL rose 1.14% or Rs 11.95 to close at Rs 1,063.25 on the BSE, while RNRL gained 3.29% to close at Rs 65.95. After the announcement of the scrapping of a non-compete clause between Ambani brothers in May, shares of RIL have gained 6.78%, while RNRL gained over 48%. During the period, the Sensex has gained 6.86%.
The cancellation of the agreement has paved the way for RIL to enter areas like telecom and power, with the exception of gas-based power plants until March 2022. RIL marked its telecom entry by acquiring 95% in Gurgaon-based broadband company Infotel for Rs 4,800 crore early this month.
The Supreme Court has ruled that no private arrangement like the Ambani brothers? agreement on sharing gas from the D6 KG basin gas can override government policy, establishing the validity of the $4.20 per mmBtu price set by a group of ministers and contested by RNRL as too high. A majority of the three-member bench headed by the then Chief Justice KG Balakrishnan also said the MoU for separation of family business was not legally binding on RIL. The court asked the brothers to renegotiate a fresh deal for gas supply at RIL?s initiative within 14 weeks. The court said the agreement should be based on the fact that government is the owner of the gas and hence, has the last word on its pricing and utilisation.
Armed with the new agreement, ADAG will now move the government seeking allocation of gas to its power plants, including its upcoming project at Dadri in Uttar Pradesh.
Addressing shareholders at the recent RIL AGM, Mukesh Ambani had hailed the judgment as an important development and said: ? As and when the power plants of ADAG are ready to receive gas, we would commence supplies to them, subject to government granting allocation to these plants in the same manner as we do to all other plants to whom Government has allocated gas from the KG-D6 gas field.?