New Delhi: Power utility NTPC Ltd is set to buy 0.61 million standard cu. m a day (mscmd) of natural gas from Reliance Industries Ltd at a government-mandated price of $4.2 (around Rs205) million British thermal unit (mmBtu).
The state-owned firm could sign the agreement in the next 10 days, said a top executive who spoke on condition of anonymity.
Legal tangle: A group of ministers had decided on 9 April to allocate 18 mscmd of gas produced by RIL at its D6 block in the Krishna-Godavari basin to power generating firms, including NTPC.
The gas will power its plants in the National Capital Region, or NCR, at Anta, Faridabad, and Auraiya and Dadri.
India’s largest electricity generator was earlier reluctant to sign the agreement because it feared that this would jeopardise its lawsuit against RIL in the Bombay high court, which it is fighting to buy gas from the producer at a price of $2.34 per mmBtu.
A group of ministers had decided on 9 April to allocate 18 mscmd of gas produced by RIL at its D6 block in the Krishna-Godavari basin in the Bay of Bengal to power generating firms, including NTPC. RIL has accordingly signed agreements with all domestic power project developers, except NTPC.
As per the terms of a priority list in the government’s gas utilization policy, NTPC ran the risk of forfeiting its allotted gas if it did not ink the deal.
“We will sign the GSPA (gas sale-purchase agreement) for this gas we do not want to leave it,” the NTPC official said.
Power secretary H.S. Brahma had earlier told Mint about NTPC’s readiness to sign the agreement.
“NTPC does not want to discuss the GSPA for the existing Kawas and Gandhar plants even though the ongoing litigation relates to the proposed expansion of Kawas and Gandhar plants. This position of NTPC is quite incomprehensible considering the fact that RIL has agreed to NTPC’s request to sign any GSPA with the caveat that the GSPAs would be ‘without prejudice’ to the ongoing matter that is subjudice. RIL has been able to sign GSPAs with more than 35 customers, however, NTPC is yet to buy KG D6 gas which is currently, the cheapest available gas in the country. NTPC’s actions have time and again defied logic and appear to be driven by factors other than commercial prudence.” said a RIL spokesperson.
R.S. Sharma, NTPC chairman and managing director, declined to comment on the matter.
NTPC operates seven power plants fuelled by gas or liquid fuel with a total capacity of 3,955MW and runs a 1,480MW gas-based plant through a joint venture. It has a total gas requirement of 16 mscmd, but has to manage with a supply of around 11.5 mscmd.
According to a communication dated 8 September from RIL to the ministries of power and petroleum, the firm has agreed to NTPC’s demand that the agreement for the plants in NCR will “state that they were without prejudice to the ongoing legal dispute between NTPC and RIL.”
The lawsuit between NTPC and RIL in the Bombay high court dates back to December 2005, with the point of contention being the existence and terms of a valid contract between the two.
NTPC claims there is one in which RIL promised to supply 12 mscmd for the expansion of the state-owned power generator’s Kawas and Gandhar power plants, both in Gujarat, for 17 years at a price of $2.34 per mmBtu.
RIL claims otherwise.
The utility filed an appeal in the Supreme Court on 5 September challenging an unfavourable Bombay high court order allowing RIL to amend its petition so as to include an earlier affidavit filed by the Union government in the same court, but in the case between RIL and Reliance Natural Resources Ltd (RNRL), promoted by Mukesh Ambani’s estranged younger brother Anil Ambani. This is the same litigation that has now moved to the Supreme Court.
Mint had reported on 4 September about the softening of the utility’s stand, and its willingness to sign agreements at the price set by the government for its projects other than those at Kawas and Gandhar.
Mint had also reported on 6 July about NTPC’s willingness to forgo the marketing margin of 17 cents per mmBtu provided it was asked by the government to do so and its planned discussions regarding the take-or-pay clause with power procurers.
The clause means that even if NTPC does not take the contracted amount of gas, it will have to pay for it.