Home >Home Page >Govt flip-flop aims to help NTPC’s case

Govt flip-flop aims to help NTPC’s case

Govt flip-flop aims to help NTPC’s case

New Delhi: The government filed its much awaited new petition in the Supreme Court in the fight between the Ambani brothers, ostensibly protecting the interests of state-owned power utility NTPC Ltd, but effectively reversing its own stated legal position.

Interestingly, NTPC is keeping open all its legal options, including a separate intervention in the same case, even though the government’s change in stand potentially pre-empts just this. Legal opinion sought by NTPC had advised that the company intervene in the case to protect its own interests.

RIL and RNRL had approached the Supreme Court against the verdict of the Bombay high court on 15 June, which had asked RIL and RNRL to sign a “suitable arrangement" for supply of gas. RIL was appealing the judgement while RNRL wanted it expedited. The Supreme Court has refused to stay the lower court’s ruling.

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 million standard cu. m a day (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 (nearly Rs114) per million British thermal unit (mmBtu). RIL claims otherwise.

Ahead of the crucial hearing in the RIL-RNRL case on 20 October, the Union government filed a revised special leave petition on Tuesday in which it defended its right to intervene in the case, said it no longer wanted the court to scrap the private agreement between the Ambanis under which RIL is to supply gas to RNRL (which it had asked for in its earlier petition on 18 July), and claimed that its right to price gas from KG D6 doesn’t weaken NTPC’s case in the high court.

The revised petition recognizes the dispute between the Ambanis as a purely commercial one and also upholds the agreement NTPC claims it has with RIL.

In a press statement, RNRL, which ran a media campaign targeting the ministry of petroleum after the 18 July petition, said it “is grateful to the Government of India for its neutral stand in proposing these amendments".

In an email response, an RIL spokesperson said: “As a law abiding and responsible corporate citizen, Reliance Industries refrains from commenting on issues which are sub judice."

On Tuesday, after filing the revised petition, additional solicitor general and government counsel Mohan Parasaran denied any reversal in the government’s stand and said: “The government has reiterated that it is no way concerned with the private family dispute."

However, the government stated in its revised petition that the terms of arrangement between RIL and NTPC were not similar to those between RIL and RNRL because NTPC is a public utility and its agreement with RIL was based on an “international competitive bid" while that between RIL and RNRL, was not based on a so-called arm’s length pricing.

Interestingly, the government’s affidavit also quotes from a meeting of an empowered group of ministers on 28 August 2007 that set the price of KG D6 gas at $4.2 a mmBtu and says: “The minister of law clarified that the two cases between RIL Vs. NTPC and RIL Vs. RNRL were separate contracts between the supplier and different companies. We have to keep these cases beyond the scope of our deliberations and take a decision in general on NELP pricing issue."

The ministerial group was asked to arrive at a pricing for gas from KG D6. Nelp refers to new exploration licensing policy, the regulatory regime under which RIL won the rights to prospect for oil and gas in the D6 block.

The government’s revised petition comes against the background of criticism by India’s top two law officers, Attorney General Goolam Vahanvati and Solicitor General Gopal Subramanium, that its previous petition jeopardized NTPC’s case in the Bombay high court, as reported by Mint earlier.

R.S. Sharma, chairman and managing director of NTPC, did not respond to repeated phone calls or to a message left on his cellphone. A senior NTPC executive, who did not want to be identified, said, “The government’s revised SLP (special leave petition) has our concurrence."

“We will do whatever is required. We will go by our legal opinion," the same executive said in response to a query on the utility’s possible intervention in the Supreme Court.

While RNRL has sought the apex court’s intervention in a special leave petition for immediate supply of 28 mscmd of gas from KG D6 at $2.34 per mmBtu for a period of 17 years, RIL, in its affidavit, has opposed this, citing that the price is 44% lower than that mandated by the government and that it cannot supply gas at a price not approved by the government and to a user not listed in the government’s gas utilization policy.

A top power ministry official, who did not want to be identified, said: “The price of $2.34 per mmBtu, reached between NTPC and RIL, was reached through international competitive bidding. We are only protecting NTPC’s interest and no one’s else interest."

Lawyers were however less generous.

Jayant Bhushan, senior advocate, Delhi high court, said the revised petition indicated a rethink on the part of the government on account of growing public perception that the oil ministry was favouring one party in the RIL-RNRL case.

Lalit Bhasin, Supreme Court lawyer and president of the Society of Indian Law Firms, said the revised petition is a natural development as the government had overstated its case (in its 18 July petition) and is now following a more focused approach confined to the issue of natural gas.


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