New Delhi: It may be fighting a bitter court battle with Reliance Industries Ltd (RIL) over the terms of gas supply to two of its plants in Gujarat, but state-run power utility NTPC Ltd is keen to source gas from the same company—for some of its other plants; at the government-mandated price; and as long as it doesn’t compromise its ongoing legal dispute.
The utility has applied for the allocation of 35 million standard cu. m a day (mscmd) of gas at the government-mandated price of $4.2 (Rs195.72) per million British thermal unit (mmBtu) for its projects in the National Capital Region (NCR). The application has been made to the newly constituted empowered group of ministers (eGoM), headed by finance minister Pranab Mukherjee, which is expected to meet on Tuesday.
Meanwhile, RIL has asked the government to immediately name customers for an additional 25 mscmd of gas so as to avoid “irreversible damage” to the field reservoirs because gas flow was being artificially restricted. The gas has to be allotted to customers by the government in keeping with the country’s gas utilization policy.
“We have asked for the allocation for NCR projects. It is not for Kawas and Gandhar (the Gujarat) projects for whose expansion we have been fighting the court case with RIL on gas supply,” said a top NTPC executive, who did not want to be identified.
Union power secretary H.S. Brahma confirmed NTPC’s application for 35 mscmd of gas and said it would be discussed at the meeting of the eGoM—a ministerial group usually set up by the government to resolve knotty issues.
NTPC wants to use the gas to power its plants at Anta, Faridabad, Auraiya and Dadri.
R.S. Sharma, NTPC’s chairman and managing director, declined comment on his firm’s new application.
“We have requested for additional allocation of 25 mscmd and 20 mscmd on a fallback basis from the KG D6 block in order to establish the full potential of the gas fields and also to maximize production for the benefit of all stakeholders. Of the 2.67 mscmd of gas presently allocated to NTPC for various plants, 2.01 mscmd of gas remains unutilized. We have already requested for this quantity of gas to be reallocated to other customers in line with the gas utilization policy, which entails that there cannot be any ‘reservation’ of gas if the customer is not in a position to consume the allocated quantity of gas,” said an RIL spokesperson in an email response.
NTPC has steered clear of sourcing gas from RIL for the expansion of its two Gujarat projects because it fears that this will jeopardize its ongoing legal dispute with the company in the Bombay high court.
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 from its D6 block in the Krishna-Godavari (KG) basin for the expansion of its Kawas and Gandhar power plants for 17 years at a price of $2.34 per mmBtu. RIL claims otherwise.
After RIL started gas production, an eGoM on 9 April allocated 2.67 mscmd of KG D6 gas for projects, including Kawas and Gandhar. NTPC and RIL, however, disagreed on the marketing margin to be paid on this and after extensive discussions, the utility signed a gas sale and purchase agreement on 23 September with RIL for only 0.61 mscmd of gas for its projects at Anta, Dadri and Faridabad.
However, NTPC has softened its stand. Mint had reported on 4 September that the utility was willing to sign agreements at the price set by the government for its projects other than those at Kawas and Gandhar.
A Delhi-based power sector analyst, who did not want to be identified given the sensitive nature of the issue, said: “I am surprised at NTPC’s posture and the volumes asked for. Once the Supreme Court judgement in the case between RIL and RNRL (Reliance Natural Resources Ltd) comes in, clarity will emerge.” His reference is to the case between RIL and RNRL over the supply of gas by the former to the latter. The outcome of this case is expected to have some bearing on the NTPC-RIL case.
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.
Apart from Mukherjee, the members of the new eGoM are petroleum minister Murli Deora, power minister Sushil Kumar Shinde, minister for chemicals and fertilizers M.K. Alagiri, home minister P. Chidambaram, law minister M. Veerappa Moily and deputy chairman of the Planning Commission Montek Singh Ahluwalia.