KG Basin row: SC says government is owner of gas

New Delhi, May 7: Emphatically stating that the government is the owner of natural resources, including gas available in the country, the Supreme Court said on Friday that no individual or commercial entity could claim right to such resources.

Delivering a judgement on the Krishna Godavari Basin Gas row between Anil Ambani's Reliance Natural Resources Limited (RNRL) and Mukesh Ambani's Reliance Industries Limited (RIL), a three judge bench of the apex court, consisting Chief Justice K G Balakrishnan, Justices P Sathasivam and B Sudershan Reddy said only the government can decide rates of these resources.

Quashing the family formula evolved by Kokilaben Ambani to solve the long drawn out dispute between her two sons, Anil and Mukesh, over sharing of gas, the court asked both to solve the matter through renegotiations within six weeks.

The decision is a major set back to the Reliance Natural Resources Limited (RNRL) headed by Anil Ambani and its impact was felt immediately on the share market.

In June 2009, the Bombay High Court had upheld the RNRL's claim of family agreement.

At the heart of the war is the gas produced by Mukesh Ambani's Reliance Industries Limited (RIL) in the Krishna Godavari (KG) Basin.

On December 18, 2009, the apex court bench had reserved its judgement in the case.

The apex court heard the case for 26 days spread over nine weeks, beginning October 20, 2009.

The gas is sold to Anil Ambani's Reliance Natural Resources Limited (RNRL) for its power plants.

The RIL had wanted to raise the price that was agreed upon by a family agreement in 2005 after the brothers decided to split the empire built by their father, Dhirubhai Ambani.

In 2007, the government said that the agreed-upon rate of 2.34 dollars per unit was far too low.

The RIL said it had to raise his rates accordingly to 4.2 dollars per unit and follow Government orders because it owns the gas, and that the RIL is just a contractor.

The RNRL accused the RIL of artificially inflating its costs and decreasing its output to make super-normal profits.

The government said it doesn't recognize the family contract between Anil and Mukesh because the Krishna Godavari Gas is a government property.

Government said that two private parties cannot strike a deal without its clearance.

The government also says it has set the new price based on a fair formula.