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NTPC blinks, to ink limited RIL gas deal

NTPC blinks, to ink limited RIL gas deal
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First Published: Fri, Sep 04 2009. 11 55 PM IST
Updated: Fri, Sep 04 2009. 11 55 PM IST
New Delhi: In a softening of its stand, state-owned NTPC Ltd will sign the gas sale-purchase agreement (GSPA) with Mukesh Ambani-led Reliance Industries Ltd (RIL) at the $4.2 (Rs205.38) per million British thermal unit (mmBtu) price set by the government for its projects other than those at Kawas and Gandhar, according to India’s top power sector official.
“NTPC will sign the GSPA with RIL. They are ready. There are some terms and conditions which need to be resolved. It will happen shortly,” said Union power secretary H.S. Brahma.
Earlier, NTPC was not willing to sign a deal because it feared this would jeopardize its ongoing legal dispute with RIL in the Bombay high court. However, as per the priority list set out in the government’s gas utilization policy, NTPC ran the risk of forfeiting its allotted gas if it did not ink the deal. It is now trying to secure the allotted 2.67 million standard cu. m a day (mscmd) of gas; failure to do so may result in the gas being diverted to other power sector consumers listed in the policy. The policy lists existing fertilizer, liquefied natural gas, petrochemical and power plants as priority gas recipients, followed by city gas distribution projects and refineries. The gas will be for NTPC’s projects at Anta, Dadri and Faridabad.
In a statement filed with the National Stock Exchange on Friday, the utility said, “...various issues for signing of gas supply and purchase agreement have been resolved, except one for which NTPC intimated its position to RIL and the same was not acceptable to them. NTPC is further discussing with RIL for early resolution of the issue.”
“We cannot be more stringent as we also require gas. However, we will not sign the GSPA for Kawas and Gandhar, as we are fighting a court case for the gas for their expansion,” said an NTPC executive, who did not want to be named.
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 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.
While an external spokesperson for RIL did not respond to Mint’s query at the time of filing the story, R.S. Sharma, NTPC chairman and managing director, declined comment.
Mint had reported on 6 July about NTPC’s willingness to forgo the marketing margin of 17 cents per mmBtu provided it is 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.
The decision to allocate 18 mscmd of gas produced by RIL at its D6 block in the Krishna-Godavari basin block to power generating firms, including NTPC, was made by a five-member empowered group of ministers, headed by then acting finance minister Pranab Mukherjee, on 9 April. RIL has signed GSPAs with all domestic power project developers, except NTPC, for the allocation of 18 mscmd of gas.
NTPC has 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.
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First Published: Fri, Sep 04 2009. 11 55 PM IST
More Topics: NTPC | RIL | Fuel | Gas | Reliance Industries |