Home > Natural Gas, Power, Six Core Infra > Is the RIL-RNRL saga over?

Is the RIL-RNRL saga over?

After fighting a long legal battle, the two companies have been asked to renegotiate the  price. What is worrysome from my perspective is that will the setting up of cheap gas-based power plants by RNRL be affected? If so, then capacity addition in India (which has a huge lag vis-a-vis target) will be hampered too.

Brief history of the battle…

An MoU was signed by Mukesh Ambani-led Reliance Industries (RIL) to supply gas from the Krishna Godavari Basin’s (KG) – D6 block to Reliance Natural Resources (RNRL) owned by Anil Ambani at $2.97 per million metric British thermal unit (mmBtu), way before the empowered group of ministers (EGoM) set a price of $4.2/mmBtu.

The matter went to the court as increase in the price of gas to $4.2 would result in higher cost for RNRL as it was to use the contracted 28 million metric standard cubic meters per day (mmscmd) of gas for generation of power. However, the Supreme Court’s verdict to follow the price set by the EGoM will boost revenues of RIL. The SC has asked RNRL and RIL to renegotiate the price of gas.

Similarly, RIL, under an international competitive bidding, had won the tender from NTPC to supply 12 mscmmd of KG gas at $2.34 per mmBtu, but later deferred its commitment stating that the gas be supplied at government-decided price of $4.2 per mmBtu. The gas supply was to cater to the expansion of NTPC’s Kawas and Gandhar power plants, both in Gujarat, for 17 years. The decision for the same is pending in the court and will decide the fortune of the NTPC’s power plants.

Supreme Court’s verdict in the RIL-RNRL case:

“Natural gas belongs to the Government of India and is not subject to private interests. RIL’s marketing freedom to sell product to other consumers was “not absolute”, as the price and quantity of the gas and tenure of the contracts are determined by the Government. The parties must abide by the price set by the EGoM.”

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