Random Thoughts

Brothers... not in arms but with arms and ammunitions!

Why did RIL take a pangaa with NTPC? I pondered while going through the news stories about the incidence. In late December last year, NTPC sued Mukesh Ambani led RIL for not accepting terms of a certain gas-supply contract agreed by both the parties some time back. Well, the matter went to the court of law and RIL reasoned out that it would not find any financiers if it accepted the contract in its present form ( which,alleged RIL, had some binding clauses. These would have been activated in case of failure to supply gas penalising the company disproportionately).

Now, if that was the concern of RIL, then why did it agree upon such a contract in the first place? RIL employes shrewd enough executives to understand simple things in life... as simple as impact of forfeiture clause in an agreement. So, RIL's reasoning (which would sound quite logical if heard in relation to a football match on the college campus!) was hard to believe.

Come February and bingo! The cat was out of the bag.

In early February, RIL floated a press release saying it had accepted the agreement which it had signed with Reliance Natural Resources (RNRL). The agreement was formed between Mukesh and his brother Anil last year in presence of their mother (this historical meeting eventually split India's biggest private business empire between the two brothers; Anil got control of RNRL).

No sooner than RIL released the press note, a director of RNRL claimed that RIL had deviated from the original terms in the agreement pertaining to gas supply to NTPC. And what was that deviation? In a three-page statement, this official said that as per the (new version of the)agreement, if for any reason, the NTPC contract did not materialise,or was cancelled, RIL's (led by Mukesh Ambani) entitlement of the 12mmscmd of gas to NTPC will also go to the group led by Anil Ambani in addition to the 28 mmscmd (this 28 mmscmd was agreed mutually in original contract without any obligation of 12 mmscmd), thereby making an aggregate base volume quantity of 40 mmscmd for Anil's group, and not 28 mmscmd,as the Mukesh Ambani group maintains.

Now that increases incentives for Mukesh group to dump this NTPC deal and be a spectator to predicament of Anil's group over the issue!

Does it sound like sibling rivalry?

posted by Ranjit @ 2/09/2006 06:47:00 pm