Justice to the Public

The dispute between RIL and RNRL has resulted in a verdict in favour of RIL, indirectly and effectively in the larger public interest. The Supreme Court judgement says that a country’s natural resources are national property and that the Government has the right to draft, design and manage policy related to the nation’s resources.

The dispute goes back to 2005 when the properties left behind by late Dhirubhai Ambani(upon his death) was to be divided between the two Ambani Brothers, Mukesh and Anil. According to the MoU Signed between two brothers in 2005, RIL was required to sell 28 mmscmd of gas from KG-D-6 basin at $2.34 per mmBtu for 17 years to ADAG Company RNRL. However, in 2007, the Government revised this price to $4.2 per mmBtu.

The judgement clearly states that individuals (even though they may be controlling managers of a company) make personal contracts without taking the consent of the shareholders of a public limited company. This also possibly sets a new trend that the Government should review all its contracts with such private entities that are carrying out the production or the excavation of minerals or other natural resources. Private players must not take unfair advantage of their influence on key ministers and politicians and make hefty profits by acquiring such resources through non-transparent means. This judgment will also eventually serve the purpose of creating a level playing field and will help in effectivedistribution and utilisation of national resources.

The verdict will prevent an estimated loss of of Rs. 3000 Cr per annum for RIL which would have occurred (at $ 2.34 per mmBtu). Cost of gas for the RNRL project will increase further and it may have to rethink upon its strategy of building greenfield power projects based on concessional gas supplies. The fate of NTPC-RIL contract which is based on $ 2.34 per mmBtu will depend on the government’s decision, since NTPC is Public Sector Company.