Anil calls on PM to present case

May Have Requested Govt To Allocate Gas To Him For Over 5 Years

ANIL Ambani stepped up efforts to secure gas supplies for various power projects by presenting his case to the highest powers in the land. On Wednesday, the chairman of the Anil Dhirubhai Ambani Group (ADAG), called on Prime Minister Manmohan Singh amid speculation that the government is keen that the Ambani brothers end their rancorous feud once and for all. 

    Mr Ambani reportedly informed the PM of his plans to generate around 10,000 mw of power capacity using natural gas. Earlier in the day, he met the PM's principal secretary, TKA Nair. Details of these discussions are not available, but Mr Ambani is likely to have requested the government to allocate gas to him for a period longer than five years, the duration for which the government's empowered group of ministers, or EGoM, has so far fixed the tenure of gas supply. Mr Ambani is thought to have made the point that he is trying to build greenfield or new power projects that need to tie up financing and thus need to be treated differently from existing power and fertiliser plants drawing KG basin gas. 
    ADAG will make the same points during its renegotiations with RIL, making a strong pitch for special treatment. "After all, RNRL was created through a demerger, following the family agreement, to source gas from RIL," said a senior ADAG official. ADAG position may not cut ice 
AND since the gas is to be supplied to power projects, there is a need for a long-term gas supply agreement, with assured quantity to support the power projects, to make sure it's a bankable agreement. After all, the power project will need huge investments and the fuelsupply agreement needs to take note of that aspect," the ADAG official added. 
    "Our power project is entirely dependent on the RIL gas, unlike other customers many of whom have shifted from naphtha to gas to become cost-competitive. That being the case, RNRL is clearly on a different footing vis-à-vis other customers of RIL. And any supply agreement needs to take cognisance of that," the official said. ADAG will tell both the government and RIL that without assured gas supply for around 15 years, a new power plant will simply not be able to attract funding from banks. 
    An RIL spokesperson declined to comment. 
    However, what is not at all clear is whether the ADAG position will cut much ice with Reliance Industries, and even the government for that matter, as the Supreme Court has clearly said the sale of gas from RIL's KG basin has to be in line with the government's policy. It remains to be seen if the EGoM, which decides the price, duration and quantity of gas, will make an exception for one company by assuring it of gas supply for a longer period. But ADAG officials point out that since operators like RIL have no marketing freedom, as has been cited by the Supreme Court, long-term supply of gas, in adequate quantities, to priority sectors like power and fertiliser, should not be a deterrent. 
    Mr Ambani's Delhi meetings come close on the heels of the Supreme Court rejecting RNRL's plea for cheap gas from RIL's KG gas basin, off the east coast, under a family agreement brokered by mother Kokilaben in 2005. 
    The younger Ambani's sojourn into the corridors of power comes in the backdrop of an impending meeting between RNRL and RIL executives to renegotiate the terms of gas pricing and supply. If successful, these talks would set the tone for a meeting between the Ambani brothers to resolve their differences, according to two senior executives close to the development. Renegotiations, which may begin during the weekend, will focus more on aspects other than price as the court has asked RIL to sell the gas at $4.2 per mBtu. 
    "There are 40-50 commercial issues to be discussed," Reliance Power CEO JP Chalasani had told an international news agency. While petroleum business head PMS Prasad will head the RIL team, Mr Chalasani will spearhead the negotiations for RNRL. 
    If these talks fail to break the deadlock, it could lead to a fresh round of litigation between the Ambani brothers. ADAG could invoke the "indemnity" clause" that is enshrined in the family contract to enable the "aggrieved party" to claim damages. "After the gas supply agreement is finalised, it will be clear as to what is the quantum of losses for RNRL, vis-à-vis, what it was entitled to as per the family MoU. And that is the amount that ADAG could seek as damages," according to a person familiar with the development. 
    While the Supreme Court has ruled that the family MoU is not legally binding, it has said "cognisance can be taken of the fact that the MoU formed the backdrop of the demerger scheme, and therefore, contents of the scheme have to be interpreted in the light of the MoU".

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Supriya Shrinate & Soma Banerjee from New Delhi.