The Hindu Business Line : NTPC-Reliance row referred to DGH

Contentious issues
The ongoing dispute between NTPC and RIL was not on the price of gas but on the fact that the current contract provides for unlimited liability for not buying and not making gas available for sale on RIL.
The RIL-NTPC issue is currently before the Bombay High Court.

New Delhi , Aug 6

A solution to the NTPC-Reliance Industries Ltd (RIL) gas contract row may be in sight with the Cabinet Secretary's office having referred the matter to the Directorate-General of Hydrocarbons (DGH) for early resolution.

Sources said that the Government had asked the Cabinet Secretary to explore the possibility and evolve the modalities for resolving the issue concerning gas supply by RIL to NTPC's projects at Gandhar and Kawas.

At the recent meeting convened by the Prime Minister's Office (PMO) to review the action taken on the decisions of the Prime Minister's Energy Co-ordination Committee (ECC), it was informed that the matter was now with the DGH, sources told Business Line.

At an earlier high-level meeting, Government representatives had observed that the ongoing dispute between NTPC and RIL was not on the price of gas but on the fact that the current contract provides for unlimited liability for not buying and not making gas available for sale on RIL.

Sources in the Petroleum Ministry, while maintaining that RIL was yet to approach the Ministry formally on the issue, said that under the production-sharing contract (PSC) there is an option available wherein the Petroleum Ministry can declare NTPC as its nominee for gas purchase.

In such a situation the end price could be lower as the gas would be valued "on the terms and conditions actually obtained including pricing formula and delivery" (i.e., actual cost) in extracting the gas whereas in all other cases, gas sales are to take place on the basis of competitive arm's-length pricing.

The RIL-NTPC issue is currently before the Bombay High Court. NTPC has requested that the contract be executed by RIL in accordance with the conditions of the gas sales and purchase agreement (GSPA) signed between the two entities for supply of 132 trillion British thermal units (Btu) of gas to the latter's 2,600 MW expansion projects in Kawas and Gandhar in Gujarat.

As per the agreement, the gas was to be supplied at the rate of $2.97 per million mBtu for 17 years, starting 2007. RIL had bagged the deal through an international competitive bidding in 2004.

However, RIL and NTPC were unable to convert the bid into a gas contract in the years that went by, as differences over the liability clause in the contract led to litigation.

If the differences are sorted out, it would come as a relief to States facing power deficits, like Delhi and Uttar Pradesh.

Meanwhile, the Power Ministry has conveyed to the PMO that it is unfair to compare the market-discovered long-term contract price of gas prevalent in 2003-04 with the spot market prices in 2005-06.

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