NTPC, RIL to meet today to break gas price deadlock

NTPC, RIL to meet today to break gas price deadlock
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First Published: Thu, Jul 02 2009. 11 55 PM IST

Fuel feud: Reliance Industries’ facility in the Krishna-Godavari basin.
Fuel feud: Reliance Industries’ facility in the Krishna-Godavari basin.
Updated: Thu, Jul 02 2009. 11 55 PM IST
New Delhi: Representatives from the Mukesh Ambani-led Reliance Industries Ltd (RIL) and the state-owned NTPC Ltd are to meet on Friday to resolve the deadlock over supply of gas from the former’s blocks in the Krishna-Godavari (KG) basin to the latter’s projects.
Fuel feud: Reliance Industries’ facility in the Krishna-Godavari basin.
The deal over the supply of 2.67 million standard cu. m of gas per day (mscmd) at the $4.20 (around Rs200) per million British thermal unit (mBtu) price set by the government has stalled over NTPC’s objection to the take-or-pay clause in the gas sales purchase agreement (GSPA) and its unwillingness to pay the marketing margin of $0.12 per mBtu to RIL.
The agreement doesn’t cover gas supply to the state-owned utility’s Kawas and Gandhar project, the subject of a case in the Bombay high court.
“The discussion with RIL representatives is scheduled for 3 July. Our team will discuss the issues which we have raised on the GSPA in our earlier communication to them. We will maintain our stand. We will only sign the GSPA once the issues raised by us are resolved,” said a top NTPC executive, who did not want to be identified.
A second NTPC executive who too did not wish to be identified, confirmed the meeting “at RIL’s office in New Delhi”. An RIL spokesperson hadn’t responded to queries e-mailed by Mint till late Thursday evening.
RIL had earlier expressed its reservations against any changes in the GSPA and had said, “The GSPA forwarded to NTPC is in the form identical to and applicable uniformly to all customers of KG D6 gas and has already been signed on the same basis with 15 fertilizer units and 15 power units. As such, we would not be in a position to accept changes to the draft as it would create serious issues of contract administration for us.”
Mint had reported on 27 June that RIL had agreed to supply gas for NTPC’s projects other than those at Kawas and Gandhar in response to an NTPC letter dated 12 June.
NTPC and RIL are fighting a lawsuit in the high court over the price at which the latter will supply 12 mscmd of gas to the former’s Kawas and Gandhar facilities for 17 years. NTPC claims the two agreed to a price of $2.34. RIL wants to sell at $4.20.
NTPC has maintained that its decision to sign the GSPA doesn’t affect its case with RIL.
The discussions between the two companies are the first after 15 June when the high court, in a separate case directed RIL to sign a “suitable arrangement” with Anil Ambani’s Reliance Natural Resources Ltd for supplying 28 mscmd for 17 years at $2.34 per mBtu—44% lower than the government-specified price of $4.20 per mBtu.
The decision to allocate 18 mscmd of gas produced by RIL from its KG-D6 block to power generating firms, including NTPC, was done by a five-member empowered group of ministers, headed by then stand-in finance minister Pranab Mukherjee, on 9 April. RIL has signed GSPAs with all domestic power project developers for the allocationof 18 mscmd from its KG basin gas finds, except NTPC and RGPPL.
NTPC, one of the lead promoters of Ratnagiri Gas and Power Pvt. Ltd, also known as Dabhol, had initially opposed the plan to sign the GSPA for the project, but had later agreed to the ministerial group’s decision.
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First Published: Thu, Jul 02 2009. 11 55 PM IST
More Topics: NTPC | RIL | Gas | Price | Mukesh Ambani |