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Page last updated at 10:58 GMT, Friday, 7 May 2010 11:58 UK

Indian court makes Reliance gas feud ruling

Anil and Mukesh Ambani
The brothers have been called the 'squabbling siblings'

India's Supreme Court has ruled in favour of billionaire Mukesh Ambani's Reliance Industries in a dispute with his brother over natural gas prices.

It said that a pact setting a price for gas to be sold from Mukesh Ambani's Reliance Industries to his brother Anil Ambani's company was not binding.

It rules the higher price fixed by the government must prevail. Analysts say Reliance Industries stands to benefit.

The ruling gives the brothers six weeks to re-negotiate the contract.

Correspondents say the ruling upholds the government's right to set prices when it comes to natural resources.

But according to a private family pact Mukesh Ambani's company was to supply gas at $2.34 (£1.59) per million units to Anil Ambani's Reliance Natural Resources Limited (RNRL) for 17 years.

This price was lower than $4.20 (£2.85 )per million units set by the government in 2006 for all buyers of gas.

Anil Ambani, who owns Reliance Natural Resources, did not accept the higher selling price set by the government, citing the agreement with his elder brother.

Shares of Reliance Industries rose 3.6%, while shares in Anil Ambani's Reliance Natural Resources plunged 16.8% after the judgement, reports say.

Reliance feud

Reacting to the judgement, Anil Ambani said he "respected" the judgement, and looked forward to "expeditious and successful" renegotiations with his brother's company to "secure gas supply" for his power plants.

Mr Ambani said his group remained committed to "emerging as India's biggest producers" and had planned gas-based power projects with a capacity of 8000 megawatts.

The gas was discovered by Reliance Industries in the Krishna Godavari basin off India's eastern coast in 2002.

The Reliance empire was divided between the two brothers in 2005 after a bitter seven-month feud.

India's oil ministry has also become embroiled in the controversy with Anil Ambani criticising minister Murli Deora for allegedly siding with his elder brother.

But Mr Deora has said gas is a national property and belongs to the people of India.

Last year Reliance Natural Resources won a case in the high court in Mumbai, which was aimed at compelling his elder brother's company to honour the family agreement.

Mukesh Ambani appealed against the judgement in the Supreme Court, which is what led to this ruling.

While delivering the judgement, the Supreme Court said that natural gas is a "national asset" and that companies involved in marketing it have to abide by the price set by the government.

But the dispute is impeding efforts by the government to harness India's natural gas reserves to help tide over its energy crunch, correspondents say.

Three companies - RIL, the state-owned Oil and Natural Gas Corporation (ONGC) and Gujarat State Petroleum Corporation (GSPC) - are investing $30bn to produce gas from the Krishna Godavari basin.

All three companies have discovered gas - and some oil - in three different blocks.



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