Buyers of RIL gas in limbo

SAVING GRACE RNRL DOESN'T HAVE A GAS-FIRED PLANT YET

State-Run Utilities That Have Signed Deals With RIL Say It's Now For Govt To Decide

 THE Bombay High Court order on Monday directing Mukesh Ambani's Reliance Industries (RIL) to sell natural gas from Krishna Godavari (KG) basin to Anil Ambani's Reliance Natural Resources (RNRL) has made the status of existing gas purchase deals uncertain.
    "There is a kind of uncertainty looming over end users who have already started taking gas from Reliance Industries allocated by the government," said KPMG executive director Arvind Mahajan.
    Most of the fertiliser and power companies that have signed gas purchase agreements with Reliance Industries in the past two months, however, say they will not be affected, as it was the government that prepared the priority list for KG gas allocation.
    "We would have to abide with the government directions and the government will see the legal implications," said US Jha, chairman and managing director of Rashtriya Chemicals and Fertilisers (RCF). The government said it is studying the order and will take appropriate action, after due consideration.
    In the judgment a division bench of the high court directed RIL to sign the gas supply deal with RNRL within a month's time.
    According to Mr Mahajan, there could be two options: either stay with the priority given earlier or take a re-look in the light of the judgment. Atleast six power and fertiliser firms that ETspoke to, however, said even if a deal is signed with RNRL, it will not matter as the Anil Ambani Group does not have any "ready" power plant to utilise the gas.
    The Anil Ambani group is scheduled to build a 7,400 megawatt gas-fired power plant at Dadri in Uttar Pradesh and a 4,000-mw plant at Shahpur. Work on these projects had been slow due to uncertainty over gas supply from KG Basin.
    These companies also expect RIL to appeal the case in the Supreme Court, although there has been no such statement from the company so far. RIL, which started producing gas from the KG basin in early April, hopes to produce up to 40 million metric standard cubic metres per day (mmscmd) of gas by July end and then scale it up to 80 mmscmd by the yearend. The government has allocated 15 mmscmd for fertiliser companies and 18 mmscmd of natural gas for the power sector.
    "Even if Reliance Industries had to supply to Reliance Natural Resources, there would not be any impact on the share allotted to the fertiliser firms as the production capacity is big enough," said Satish Chander, president of the Fertiliser Association of India.
    As per the court order, technically the first 28 mmscmd of gas should go to RNRL. RIL has signed gas sale agreements with 12 urea manufacturers and a few power utilities in the past two months. All the contracts were signed with the rider that they would be subject to the high court's final judgment.
    Officials from state-run utilities said they would first go through the order and will have to follow what the government decides. Two private power firms that ET spoke to, declined to comment. All eyes are now on Mukesh Ambani who will decide RIL's future course of action. Renegotiations between the Ambani brothers and the opinion of Kokilaben Ambani too will come into play in the final settlement, said an analyst who tracks RIL.

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