The last time Mukesh and Anil Ambani negotiated across the table was in 2005, when their mother Kokila Ben oversaw the split of the Reliance empire between the two estranged brothers. Now, once again they are being forced to come to the negotiating table, except that this time around it is the Bombay High Court that’s asking them to do so.
On October 15, the court gave the two brothers four months to negotiate the commercial details of a gas deal that was signed as part of the split two years ago. As part of the settlement, the Mukesh Ambani-controlled Reliance Industries Ltd (RIL) would supply gas to the Anil Ambani-controlled Reliance Energy’s proposed 7,000 MW power plant in Dadri, Uttar Pradesh.
So what does it mean to the brothers? For the younger one, it validates the sanctity of the deal, over which the elder brother has been dragging his feet. This means if the gas price and terms of supply are sorted out, Anil can look forward to getting his mega project off the ground. For Mukesh, the court order has precipitated a fourmonth delay in sewing up 37 per cent of the total supply from his gas wells in Krishna-Godavari basin, off the coast of Andhra Pradesh.
This is relevant since production from the $6-billion investment is slated to commence next year. In fact, Mukesh lobbied the government to hold a string of Cabinetlevel meetings to approve RIL’s gas pricing, even though the administration was busy deciding whether or not to call for elections, following its allies’ opposition to the proposed nuclear deal.
The good news for RIL is that the court has not endorsed the pricing suggested in the original contract, which is close to 40 per cent cheaper than what it plans to charge consumers, and which has been approved by the government.
Interestingly, amidst the feud between the brothers on the gas issue, the court order reflects a harmony between the government and the legislature. Last month, when the government approved RIL’s price for the purpose of valuation of its share, it did not comment on the fate of the volume that was locked in a legal battle between the brothers. This week, the court said that government policy would prevail where applicable.
It appears that while Mukesh might extract a good price for his gas, he might have to contend with the fact that one of the buyers is none other than his estranged younger brother.
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