RIL says cant stick to gas pacts due to government policy

Written by Sanjay Jog | Mumbai | Updated: Oct 10 2009, 03:56am hrs
Reliance Industries (RIL) told the Supreme Court in its recently filed affidavit that it has to go back on contract signed with Tata Power and GAIL India due to the Centres Gas Utilisation Policy.

Prior to the promulgation of the governments gas pricing and Gas Utilisation Policy, RIL had also entered into agreements with 12 customers for KG D6 gas. These agreements being subject to government approval were modified following the approval of the gas price and allocation of gas under the Gas Utilisation Policy. said RIL in the affidavit.

The government released the Gas Utilisation policy in September 2007. Tata Power and GAIL are not being supplied gas as a result of not receiving allocation from the government under the policy. Reliance Industries is currently engaged in a legal dispute against NTPC and Reliance Natural Resources over KG D6 gas supply.

Under the gas utilisation policy, of the 40 million metric standard cubic meter per day (mmscmd) 18 mmscmd has been allotted to the power sector, 15 mmscmd to fertiliser and the balance to the LPG and other sectors. Throwing the ball back in RNRLs court, RIL said, While RIL has been unable to receive an allocation for its existing needs, RNRL is seeking an allocation for its non-existent future needs. This is not allowed under the governments policies.

If the demerger had never occurred, RNRLs not-yet-existing power plants (in fact nowhere in the horizon) would have been in the same position and no special rights of any nature can be created in favour of RNRL by the demerger.

RIL has also refuted allegations levied by RNRL that RIL is seeking to hide behind the governments policies for its own benefit. RIL has said the governments Gas Utilisation Policy does not even permit RIL to meet its own captive consumption requirements and is forced to buy expensive RLNG at a much higher price than the gas from KG-D6, leading to significant adverse financial impact.

RIL said, The company currently requires about 20 mmscmd gas for its captive consumption. RIL has not been allocated any gas by the government under the Gas Utilisation Policy and is forced to purchase imported gas at significantly higher prices. This clearly shows that RIL has no entitlement to any physical quantities of gas even for its own captive consumption.

The affidavit further adds The fact that RIL has not received any allocation from the government for its own captive consumption makes the RNRLs arguments futile.