New Delhi: NTPC Ltd has taken strong exception to petroleum and natural gas minister Murli Deora’s remarks made in Parliament on Thursday, when he said that the government had not approved the price of $2.34 (around Rs112) per million British thermal unit (mBtu) for the natural gas to be supplied by Mukesh Ambani-controlled Reliance Industries Ltd (RIL).
Deora’s remarks also contradicted the current stand of the petroleum ministry.
India’s largest power generation firm said it will lobby with the government to protect its case in the Bombay high court that it is fighting against RIL over the pricing issue.
“We will present our case with the concerned government authorities. Petroleum minister cannot give this argument when the case is still on in the Bombay high court. He is not the whole and sole in the government,” said a top NTPC executive, who declined to be named given the sensitive nature of the issue. “We will go everywhere, including the power ministry. We will ask the power ministry, which is our parent ministry, to take up this issue with the Prime Minister’s Office.”
NTPC is concerned as the minister’s statement significantly weakens its position in the litigation with RIL over the supply of gas from the latter’s Krishna-Godavari (KG) basin, off the eastern coast of India.
Deora’s remarks also contradicted the current stand of the petroleum ministry. Sandeep Bhatnagar / Mint
The lawsuit between NTPC and RIL in the high court, which dates back to December 2005, is about whether there is a valid and concluded contract with RIL.
RIL had secured the bid to supply 12 million standard cu. m a day (mscmd) of gas for the expansion of NTPC’s Kawas and Gandhar power plants, both in Gujarat, for 17 years at a price of $2.34 per mBtu in 2004.
Replying to a debate in the Rajya Sabha on the availability of gas to the power sector, Deora said on Thursday: “It must also be noted that the contractor (RIL) has made no proposal on the price formula for determining the pricing of supply of gas to be made to NTPC, which is required under the PSC (production-sharing contract). This process not having been undertaken, e-GoM’s (empowered group of ministers) approved price is applicable.”
PSC is an agreement between the Union government and RIL regarding the percentage of production each will receive after the company has recovered a specified amount of costs and expenses.
“In the course of the discussions, the minister replied to various points raised. He has clearly stated that the NTPC matter is sub judice and he can’t be quoted out of context. It was not the intention of the minister to make any final statements on all the pending issues,” a petroleum ministry spokesperson said.
“The matter (between NTPC and RIL) is pending in the Bombay high court. Let the court decide,” said a top power ministry official, who did not want to be identified.
The minister’s remarks contradict the existing stance of the petroleum and natural gas ministry, which has carefully avoided any views on the disputed NTPC-RIL gas supply arrangement.
The decision to price the gas produced by RIL from its KG-D6 block at $4.2 per mBtu was made by an e-GoM on 12 September 2007. The petroleum ministry in a press statement on the same day had said that the e-GoM’s decision will be “without prejudice to the NTPC versus RIL and RNRL (Reliance Natural Resources Ltd) versus RIL court cases, which are at present sub judice”.
Similarly, another petroleum ministry press statement dated 4 December said: “Regarding the NTPC-RIL sale price, it has been decided that the verdict of the court should be awaited.”
NTPC has already sought legal opinion from India’s attorney general on the government’s petition in the lawsuit between RIL and Anil Ambani-promoted RNRL.
Based on the feedback, NTPC may intervene in the case between the firms promoted by the estranged Ambani brothers, as reported by Mint on 22 July.
“We are still awaiting the attorney general’s opinion,” the NTPC executive said.
RIL is contesting the claims of RNRL over the supply of 28 mscmd of gas from the offshore block for 17 years at $2.34 per mBtu, 44% cheaper than the government fixed price of $4.20.
RNRL is basing its claims on a 2005 family pact, but RIL has held that it cannot give gas to anybody without the approval of the government, the owner of all sovereign assets.
The three-year-old corporate battle has escalated to the Supreme Court, which is scheduled to hear arguments of the stakeholders on 1 September.
An external spokesperson of RIL declined comment.
“We have already pointed out in our letter to the power minister that NTPC’s interests are materially affected by the petroleum ministry’s newfound stand on pricing and utilization of gas, and the potential loss to NTPC could be up to Rs30,000 crore,” a spokesperson for the Reliance- Anil Dhirubhai Ambani Group, of which RNRL is a part, said in an email response. “The petroleum minister’s reported statement in Parliament—if it was made—is very surprising because the e-GoM, while determining a price of $4.20, has categorically stated that this is without prejudice, and hence not applicable to the pending court cases between RIL-RNRL and RIL-NTPC.”