The Ambani saga

Reliance shareholders looking for more signs of peace between the Ambani brothers have got what they wished at RIL's Annual General Meeting on June 18 – a call from Mukesh Ambani for harmonious and constructive relationship with younger sibling Anil.

"With legal dispute (over supply of natural gas from RIL to Anil Ambani Group's power plants) behind us, we look forward to a harmonious and constructive relationship with Anil Dhirubhai Ambani Group," Mukesh said, exactly five years to the day when he and his brother Anil split the Reliance empire created by their father Dhirubhai Ambani.

RIL chairman Mukesh Ambani told shareholders that the company will push into two new sectors, power and telecommunications. Mukesh said that RIL is "drawing up specific plans for mega-investments" in the power sector, including clean coal, solar and nuclear power initiatives. (Source: AP Image)

Although Anil did not turn up for the 36th Annual General Meeting of Reliance Industries, as was speculated in the market and the media, Mukesh bellowed the message of peace loud and clear. The brothers have been battling ever since Ambani family patriarch Dhirubhai Ambani passed away in July 2002 and split the businesses between them under an agreement overseen by their mother Kokilaben on June 18, 2005.

The warring Ambani brothers on May 23 agreed to dump their differences and non-compete agreements saying this would eliminate any room for further "disputes". This would allow the companies backed by the two brothers to compete in businesses head-to-head. However, as a goodwill gesture, RIL said that it would not enter the gas-based power generation arena till 2022.

The Supreme Court ruled that the Ambani brother must renegotiate a family deal over the country's largest gas field, giving the government control over setting gas prices.

The Reliance Group, founded by Dhirajlal Hirachand Ambani, also known as Dhirubhai Ambani, is India's largest private sector enterprise, with businesses in the energy and materials value chain.

Dhirubhai Ambani, son of a village school teacher, took Reliance public in 1977. He passed away in 2002, leaving the Reliance empire to his two sons Mukesh Ambani and Anil Ambani.

Almost eight years ago, India's largest private firm, Reliance Industries, struck gas in Krishna Godavari basin, a hundred kilometers off the coast of Andhra Pradesh.

The supply of 28 million cubic meter of gas a day to Reliance Natural Resources (owned by Anil Ambani) by Reliance Industries (owned by Mukesh Ambani) was the centre of the dispute between the the billionaire brothers.

RNRL sought gas from RIL's KG-D6 gas fields at $2.34 per mmBtu, 44 per cent lower than the government set price, for its proposed 7,800 MW power plant at Dadri. RIL contented that it could not sell gas at a price less than $4.20 per mmBtu as set by the government and to customers other than those identified in accordance with the Gas Utilisation Policy (GUP).

The Bombay High Court had last year upheld RNRL's claim for gas as made out in a family agreement that split the Reliance business empire between the two brothers.

When the KG basin gas was discovered, Reliance was an undivided empire, jointly run by Mukesh and Anil Ambani. The Reliance empire was split in 2005 after a bitter feud between the two brothers.

Anil was handed over RNRL in February 2006. RNRL claims at least one-third of peak output from KG-D6 flows, citing a 2005 family agreement that divided Dhirubhai Ambani's empire between the two brothers.

The high octane war between the Ambani brothers took an ugly turn when gas started flowing from the KG basin.

The dispute also reverberated in Parliament and spilled on to the front pages of newspapers by way of an unprecedented media campaign. And the action then moved to the country's apex court.

Anil accused Mukesh of artificially inflating his costs and decreasing his 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 government property, and therefore, two private parties cannot strike a deal without the government's clearance.