Monday, January 19, 2009

Anil vs Mukesh: feud far from over

The recent decision of Empowered Group of Ministers (EGOM) on gas on the allocation of gas from the Mukesh Ambani-controlled Reliance Industries Ltd (RIL) to Anil Ambani's Dadri power project, does not spell a truce between the fighting Ambani brothers.
The EGOM, headed by external affairs minister Pranab Mukherjee, had directed that “necessary allocations from RIL’s KG-D6 fields be made to Dadri as and when it was ready to commence production.”
As it was for the first time that an assurance of fuel supply came for the Dadri power project, the intervention by the government made many believe that the prolonged deadlock over gas supplies would soon come to an end.
However, developments over last week made it clear that the issue relating to the pricing of gas would continue to dodge discussions between the fighting Ambani brothers for some more time. HT was the first to say on January 10, after the EGOM decision, that the fight is far from over and pricing of gas would continue to play a spoil sport between the two sides.
Hence, even though the government has told the Bombay High Court that gas from RIL’s gas fields will not be sold below $4.2 (Rs 201.6) per million BTU (British thermal unit), the Anil Ambani company-RNRL has staked claim on gas at $2.34 (Rs 112.32) per million BTU.
According to Anil Ambani, RIL under a 2005 MoU, had assured supplies of 28 million metric standard cubic meters of gas a day (MMSCMD) to Dadri for 17 years at a concessional rate of $2.34.
The EGOM, in September last year, had fixed the price of gas at $4.2 per million BTU for all consumers, including those in core sector industries like power and fertilisers.
While it remains to be seen how the Court resolves the dispute, assurance from the EGOM over supply of gas by RIL to Dadri power would certainly help the project in achieving a timely financial closure. Lack of clarity on the fuel supply was one of the issues delaying financial closure for Dadri.