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The gas row between the Ambani brothers, that also has engulfed the Government of India, has thrown up some very unsavoury linkages

The nexus between big business and politics is neither new nor unique in India. However, the latest round of squabbling over natural gas from the Krishna Godavari (KG) basin off the coast of Andhra Pradesh between the Ambani brothers has revealed new facets of the infamous nexus that could have wide-reaching implications for the economy. In other words, the legal dispute that is currently pending is more than a just case of sibling rivalry, but one that relates to ownership, control, pricing and availability of a resource that belongs to the people.

For the first time, a tycoon, Anil Ambani, head of Reliance Natural Resources (RNRL), publicly lashed out against a government functionary, namely, the Union Minister for Petroleum & Natural Gas (MoPNG), Murli Deora for allegedly acting in a partisan way to aid estranged brother Mukesh, head of Reliance Industries (RIL).

From September, the Supreme Court (SC) would commence hearings on a contractual dispute between both, which also involves the government. Here's the backdrop. In 1999, the MoPNG announced that a consortium comprising RIL and Niko Resources was the successful bidder (contractor) for exploration of the deep-sea block D-6 in the KG basin. In April 2000, a production sharing contract (PSC) was signed between the MoPNG and the contractor.

In July 2002, Dhirubhai Ambani died and in October that year, gas was discovered in the KG-D-6 block. In June 2004, RIL entered into an agreement with the Uttar Pradesh government to set up the “world's largest gas-based power plant” with a capacity to generate 3,500 megawatt of electricity at Dadri, near Delhi, based on KG gas. Between November 2004 and June 2005, the Ambani brothers fought a bitter battle that culminated in an uneasy settlement that was supervised by their mother Kokilaben. After the Reliance empire was partitioned, the Mukesh group got the gas exploration business while the Anil group got to control power generation activities.

From 2006 onwards, RIL and RNRL have been fighting over an agreement that stipulated a gas price of $2.34 per mBtu (million British thermal units) for sale of 28 mscmd (million standard cubic metres a day) to RNRL for a period of 17 years. The MoPNG refused to approve the price. In September 2007, an empowered group of ministers led by Pranab Mukherjee (then Foreign Minister) approved a formula mooted by RIL pricing the gas at $4.21 per mBtu.

In June 2009, the Bombay High Court ruled in favour of RIL to supply gas to RNRL as per the original terms of the contract and urged both brothers to arrive at a “suitable arrangement” or let their mother arbitrate. Both filed cross appeals in the SC.

July onwards, Anil aired allegations against Mukesh and the MoPNG for ostensibly pandering to RIL's greed. He accused RIL of (among other things) “gold-plating” the gas project to reap undue fiscal benefits and the MoPNG of, not merely obliging RIL at the expense of RNRL, but also acting against the public sector undertaking the National
Thermal Power Corporation.

The SC has to decide a number of contentious issues. Is the government acting as a custodian of national resources or is it partisan? Is the family settlement valid or not and what should the price of gas be. It would have to go beyond the contractual dispute to interpret the PSC. The decision could set important precedents on the role of the government and private entities in controlling the country's natural resources.