On 15 June, Bombay High Court ordered the Mukesh Ambani-controlled Reliance Industries (RIL) to sell gas at a sharply reduced price to Reliance Natural Resources (RNRL). RNRL is part of the Anil Ambani Group, which is owned by Mukesh’s estranged younger brother Anil).
RIL was instructed to sell gas at US$2.34 per mmBtu (million British thermal units) to RNRL. This price is 44.2% lower than the US$4.20 per mmBtu that RIL agreed to charge power and fertilizer firms under recently signed agreements, and which is based on a government-approved formula.
The court’s decision will lead RIL to suffer serious financial losses, since it will have to sell at least 35% of its natural gas production (assuming a production level of 80 million standard cubic metres a day) at lower than the US$4.20 rate set by the government. In addition, RIL will have to pay the government a revenue share based on the notional price of US$4.20 per mmBtu.
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