Ambani gas pact flouts government authority says Oil Ministry
August 11, 2009
The part of the Ambani family memorandum of understanding (MoU) that divides the gas found by Reliance Industries Ltd (RIL) between the two companies owned by the two brothers is against public interest, flouts government authority and will set a wrong precedent for others, the Oil Ministry said.
Responding to comments sought by the Prime Minister's Office (PMO) on a letter from industrialist Anil Ambani, the ministry last week wrote that the family MoU was clearly against the provisions of the Production Sharing Contract (PSC) and will harm the public interest.
Anil had written to the Prime Minister on 15th July seeking a direction to the Oil Ministry to stop favouring Reliance Industries in a commercial dispute between two companies.
The Bombay High Court's 15th June order that upheld the MoU, gives precedence to a private family MoU over the government's rights under the PSC, the policies approved by the Government and the Constitution of India, it said. The court had asked RIL to supply more than one-third of peak output from KG-D6 fields to Anil Ambani Group's Reliance Natural Resources Ltd (RNRL) at $2.34 per million British thermal unit—a rate 44% lower than government approved price for the fuel from the fields.
Any private arrangement to distribute natural gas for private business plans is nothing but monopolising a vital natural resource and will set a bad precedent under which production from other fields may also be appropriated, the ministry stated.
Quoting articles of the PSC that companies like RIL sign with the government for exploration and production of oil and gas, the ministry said, "Natural gas has to be sold as per the Gas Utilisation Policy of the government. RIL's freedom to market as per the PSC is subject to the Gas Utilization Policy (outlining sectoral priorities) and the pricing formula will be approved by the government."
The ministry said several consumers and stakeholders such as Department of Fertilizers, Chief Minister of Andhra Pradesh and some power companies have expressed apprehension about the availability of gas in the wake of the Bombay High Court judgment.
The stakeholders had asked the government to take suitable action to protect the interest of consumers and assert its sovereign rights over the natural gas.
The ministry said after examining the implications arising out of the Bombay High Court order and contents of the family MoU related to allocation and supply of gas and serious concerns expressed by consumers from fertilizer and power sector, the government filed a petition before the Supreme Court to protect its rights under PSC. The SLP was also to protect policies approved by the government and its sovereign ownership rights under the Constitution and its right to make policies for regulation and development of vital resources like natural gas for the benefit of people or consumers at large and in the overall interest of the national economy.