INDIA Reliance Industries, controlled by Mukesh Ambani, India’s wealthiest man, is set to take a rival group run by his younger brother Anil to the Supreme Court in a gas dispute that promises to become a test case.
Reliance Industries is fighting a ruling last month from the Bombay High Court that it should supply gas to Anil’s Reliance Natural Resources at about half the price agreed with the government, in a wrangle linked to a succession battle between the brothers.
“We have been advised to and are filing appropriate proceedings in the Supreme Court,” Reliance Industries said in a letter to Reliance Natural Resources.
The battle over the gas from the KG Basin discovery on India’s east coast stems from the death in 2002 of Dhirubhai Ambani, the brothers’ father, who did not leave a will.
Kokilaben Ambani, the widow, negotiated a split of her husband’s business empire between the brothers, in which Mukesh’s Reliance Industries kept the gas, oil and petrochemical businesses, and Anil the telecoms and financial units.
Under this agreement, Reliance Industries agreed to supply gas from the KG Basin, one of India’s biggest fossil fuel discoveries, to Reliance Natural Resources at the same price given a state electricity provider – $2.34 per million British thermal units.
But Reliance Industries claims the agreement was always subject to government approval while Reliance Natural Resources contends it stands on its own.
The dispute has worried the government, which contends that the gas is sovereign property and Reliance Industries merely the contractor for its extraction.
According to the government, the brothers have no right to set a price between themselves for a natural resource that belongs to the state.
The government is understood to be still considering whether to intervene in the case with its own suit.
The case promises to be a test of Indian law, particularly if Reliance Natural Resources contends that the order handed down by the Bombay High Court stands above any executive order from the government regarding the gas sale price. Reliance Industries has agreed with the government to charge $4.20 per mBtu for the gas and allocations have already begun to state fertiliser companies.
Reliance Natural Resources is also arguing that it should be allocated up to half of peak production from the field for power plants it is planning to build. The government, however, wishes to first allocate the gas to fertiliser companies before satisfying demand from power companies.
