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RIL-RNRL dispute : Over to Supreme Court


Well, the drama has now shifted to the Supreme Court of India. Yes, the dispute between the country’s top two billionaires over the sharing of gas from KG basin will move to Supreme court from 20th of this month. The finals is on and nobody has any clue as to who will take the trophy. But, whoever wins it, the bounty is really huge and is worth the battle.
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Earlier, the ruling from the Bombay high court required the gas from the fields operated by Mukesh to be sold to Anil for almost 44% less that the price that was set by the government in 2007. Since the battle is worth billions and that the government is part of it indirectly, it is widely expected that the ruling will come sooner. If the court ruling is going to be in favor of Anil, it is expected that the earnings of RIL will be affected after say 2 years time.
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RNRL was the first to file a petition in the Supreme court on July 3rd and had said that the Bombay high court has given a clear indication with respect to the price, quantity and tenure of the gas supply. The company had also requested the court to prevent RIL from selling gas to other customers as well.
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This was followed by a petition that RIL filed on July 4th saying that it cannot sell gas at a price less that what the government had decided. The company had also sought for a stay on the Bombay high court order. However, no stay has been imposed so far.
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While the tussle with the RNRL is happening, RIL is also fighting NTPC over yet another gas supply contract. Currently there is no rosy picture for RIL, since it was only RNRL and NTPC who were to be the biggest gas buyers to the tune of 40 million cubic meters of gas. RIL and NTPC had negotiated a contract for supplying gas from RIL’s KG basin reserves in 2003 – 2004, but RIL later took the stand that the contract was not concluded. Clearly the stakes are very high and it seems that RNRL’s gains would be much bigger than RIL’s losses.
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To contact the equity analyst on this story: Arun Gopalan in Chennai at
Arun@hbjcapital.com
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