New Delhi: The power ministry seems to have worked out a strategy to help state-owned power utility NTPC Ltd get inexpensive gas for two of its plants in Gujarat, irrespective of which way the utility’s legal battle with Reliance Industries Ltd (RIL) over the supply of gas to the same plants goes.
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The ministry wants the ministry of petroleum and natural gas, which oversees such matters, to redistribute inexpensive gas currently given to NTPC’s Anta, Auraiya, Dadri and Faridabad plants, to the two Gujarat plants—at Kawas and Gandhar. The price of this gas is regulated by the government (through the administered price mechanism, or APM), currently at around $2.30 (Rs112.50) per million British thermal unit (mBtu).
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The plan is to make up the difference at Anta, Auraiya, Dadri and Faridabad using gas from RIL’s block (D6) in the Krishna-Godavari (KG) basin off the east coast of India.
“We want the KG-D6 gas only for stations other than Kawas and Gandhar. Also, we want the redistribution of administered price mechanism, or APM, or Panna-Mukta-Tapti (PMT) supply meant for Anta, Auraiya, Dadri and Faridabad for Kawas and Gandhar projects,” said a top power ministry official, who did not want to be identified.
The government had allotted gas from RIL’s KG D6 block to some NTPC plants, and the plants of a few other fertilizer and power companies.
It has earmarked 2.67 mscmd (million standard cu. m per day) of gas from KG D6 to NTPC, of which 2.06 mscmd is to go to the utility’s two Gujarat plants. NTPC isn’t keen on signing an agreement for this because it would affect its position in the case it is fighting in the Bombay high court.
The utility, however, will lose the rights to this gas, a scarce fuel, if it doesn’t sign the agreement.
The power ministry’s plan will ensure that NTPC effectively gets gas for its Kawas and Gandhar plants at a rate slightly lower than the $2.34 per mBtu at which RIL had originally agreed to supply gas to these plants. And that it gets to use the KG-D6 gas allotted to it without affecting its legal position in anyway.
The utility is willing to sign the gas sale purchase agreement (GSPA) with RIL for 2.67 mscmd at the government-mandated price of $4.20 per mBtu for projects other than Kawas and Gandhar.
Girish Solanki, an analyst at Mumbai brokerage firm Angel Broking Ltd, termed the plan “positive for NTPC” because it would help the utility access inexpensive gas.
Mint had reported on 6 July that the utility was willing to sign the agreement provided its concerns regarding the marketing margin RIL is charging and a take-or-pay clause are addressed.
The case between NTPC and RIL in the Bombay high court dates back to December 2005 and has to do with the terms of gas supply to the utility’s two Gujarat plants for 17 years at a price of $2.34 per mBtu.
The expansion efforts that this supply would have fuelled have since been put on hold and the high court has temporarily allowed RIL to sell gas from its KG basin finds.
An NTPC executive said the power ministry’s plan would work very well for the utility. Its willingness to sign a GSPA with RIL over the supply of gas to projects other than Kawas and Gandhar “should be without prejudice to our rights and contentions in our court case”, added this person, who did not want to be identified.
A spokesperson for Reliance Industries didn’t respond to queries mailed on Tuesday.
Separately, RIL, controlled by Mukesh Ambani, and Reliance Natural Resources Ltd (RNRL), promoted by Anil Ambani, are fighting a case in the Supreme Court over the supply of gas from the KG D6 basin.
RNRL claims it has an agreement with RIL for the supply of 28 mscmd of gas for 17 years at a price of $2.34 per mBtu.
RIL contests this claim and says it cannot supply gas at a price other than the one set by the government, of $4.20 per mBtu, and to buyers other than those prescribed in the government’s policy on gas utilization.
An official at the ministry of petroleum and natural gas, who declined to be identified, said the ministry would have to examine the power ministry’s request for inexpensive or APM gas before commenting on the merits of the request.