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Government refutes R-Adag allegations

Government refutes R-Adag allegations
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First Published: Sat, Aug 22 2009. 12 26 AM IST

Mind games: A shot of the ads that were splashed in several newspapers.
Mind games: A shot of the ads that were splashed in several newspapers.
Updated: Sat, Aug 22 2009. 12 26 AM IST
New Delhi: The government on Friday broke its silence and put out a statement to refute the allegations made against it by Reliance-Anil Ambani Group (R-Adag) in a controversial series of front-page advertisements in several newspapers, including Mint.
The statement that was vetted by solicitor general Gopal Subramanium said the government would earn revenues of Rs84,000 crore from a gas field operated by Reliance Industries Ltd (RIL) off India’s eastern coast and not Rs500 crore as claimed in the advertisements.
Mind games: A shot of the ads that were splashed in several newspapers.
These advertisements has also alleged that the Union ministry of petroleum and natural gas was, because of its policies, forcing state-owned utility NTPC Ltd to suffer Rs30,000 crore losses while garnering “super-normal profits” of Rs50,000 crore for Reliance Industries Ltd. The advertisements also claimed the ministry was allowing RIL to get away with a fourfold increase in the capital spending plan in the D6 block of the Krishna-Godavari (KG) basin, where it has struck massive natural gas reserves.
The government also said in its statement that “ministry of petroleum and natural gas is committed to protect the interests of NTPC by all means.”
R-Adag was quick to respond. “We are happy to note that in response to recent events, the petroleum ministry has in its statement today expressed its commitment to protect the interests of NTPC. We trust the petroleum ministry will take all steps to now ensure that NTPC gets 12 mscmd (million standard cubic metres per day) of gas from RIL at a price of $2.34/mBtu (million British thermal unit) for 17 years for its Kawas and Gandhar expansion projects,” the firm said in a statement.
“We trust that, in view of today’s statement, all consequential steps will now be taken to fully enforce NTPC’s contract with RIL,” it added.
The press note also explained that the increase in capital expenditure was on account of various factors such as “increase in reserves by over 2.5 times, production facilities by three times, peak production by two times, increase in number of wells, field life and inflation in equipment and services industry”. It also added, “it may be noted that the figures are only estimates and cost recovery would depend on actual audited expenditure figures”.
“The petroleum ministry has now taken up the task of defending RIL’s apparently “gold-plated” capital expenditure upon itself rather than seeking clarification from RIL in national interests,” said the R-Adag statement.
NTPC’s fortunes are inextricably linked to the case between the warring Ambani brothers in the Supreme Court. The government had, in a petition filed before the Supreme Court, made a case for scrapping the gas supply agreement between Mukesh Ambani, who controls RIL, and brother Anil Ambani, who heads Reliance Natural Resources Ltd (RNRL). The terms of this agreement, including the price of $2.34 per mBtu, are similar to the terms of gas supply to NTPC’s Kawas and Gandhar plants in Gujarat by RIL, being contested in the Bombay high court.
The government had also intervened in the same case (RIL versus RNRL), when it was being fought in the Bombay high court. Both interventions have been seen by analysts as weakening NTPC’s case.
RNRL is involved in a bitter corporate battle with RIL over the validity of a family agreement between the two Ambani brothers for the supply of gas from RIL’s D6 block in KG to a power plant being set up by Reliance Power Ltd, an RNRL associate.
NTPC is fighting a case in the Bombay high court against RIL over the supply of gas from KG D6. 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)of gas for the expansion of its Kawas and Gandhar power plants for 17 years at a price of $2.34 per mBtu. RIL claims there is no contract.
The press note also defended the way the price was fixed and gas allocated, and stated, “The price formula is based on the principle of ‘arm’s length’ and in accordance with the provisions of the production sharing contract (PSC).”
The decision to issue the press note was taken after a meeting of the four-member ministerial panel, comprising finance minister Pranab Mukherjee, law minister M. Veerappa Moily, power minister Sushilkumar Shinde and petroleum minister Murli Deora, which has been mandated to come up with a unified stand of the government.
Explaining the rationale for issuing the press note, the release stated, “it is considered necessary to issue the present press release to correct the ongoing propaganda against the government in matters, some of which are sub judice in courts. The government is of the view that such an advertisement campaign on the eve of the hearing in the Supreme Court is most unfortunate.”
Media executives had pegged the R-Adag campaign at Rs15 crore.
While R.S. Sharma, chairman and managing director of NTPC, declined comment, a senior company executive who did not want to be identified termed it a “positive move”.
On 20 August, Mint reported that the government may soon file an affidavit in the Supreme Court case between the Ambanis seeking to protect NTPC’s interests.
A RIL spokesperson said: “As stated earlier, the release of the advertisement completely demonstrates the fact that RNRL is indulging into an orchestrated campaign intended to bring into public debate and prejudge the issues that are pending adjudication before the courts. As stated earlier, we reiterate that we will present our views and contentions on all aspects only before the courts.”
In a related development, the same senior executive at NTPC said, that the utility has refused to claim damages from the Mukesh Ambani controlled Reliance Industries Ltd (RIL) for its refusal to honour a contract on the supply of gas. RIL claims there is no valid contract between the two firms.
The executive was reacting to a Wednesday report by PTI that NTPC could claim damages from RIL for not keeping its commitment and that the difference between the government approved price of $4.2 per mBtu and the $2.34 per mBtu committed in the tender would have to be made good by RIL.
Bhuma Shrivastava in Mumbai and Manish Ranjan in New Delhi contributed to this story.
utpal.b@livemint.com
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First Published: Sat, Aug 22 2009. 12 26 AM IST