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Home News Power Sector News Ultimately consumers have to bear additional cost paid to Reliance - NTPC

Ultimately consumers have to bear additional cost paid to Reliance - NTPC

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KG-D6The power ministry, which is the administrative ministry of state-owned National Thermal Power Corp Ltd, has said if the country's biggest power generator is denied gas from Reliance Industries Ltd's Krishna-Godavari block at $2.34 per mBtu, it will not take the burden but pass the additional cost on to the customers. "In the event that gas is not supplied to NTPC at $2.34 per mBtu (the earlier agreed price), the burden of extra price of gas would be passed on to the customer as the fuel cost is a pass-through as per regulations for fixing tariff under Electricity Act, 2003," the power ministry said in its submission to the Parliamentary Committee on Public Undertakings on Wednesday.

In what is perhaps the most bizarre part of the gas dispute between the two Ambani brothers, two arms of the government seem to be fighting each other. While NTPC is fighting a legal battle with RIL in the Bombay High Court over supply of 12 mcmd gas at $2.34 per mBtu, the petroleum ministry – which claims complete control over the pricing and distribution of RIL's gas – insists on a price of $4.20 per mBtu.

Reliance Industries had, in 2001, bid for an NTPC tender for supply of the gas for expansion of NTPC's Kawas and Gandhar power plants in Gujarat. The Mukesh Ambani firm did not sign a final gas sale and purchase agreement (GSPA) with NTPC despite emerging as the lowest bidder, and the power major dragged it to court in December 2005.

Meanwhile, the Supreme Court on Wednesday asked the Mukesh Ambani-promoted Reliance Industries whether it was not the intention of mother Kokilaben to strike a balance between her two sons by giving gas field assets to RIL and supplying natural gas to the Anil Ambani-promoted Reliance Natural Resources (RNRL) at a concessional rate. The two brothers are fighting a legal battle in the apex court over the pricing of natural gas produced by RIL from KG-D6.

"The KG basin gas fields were joint assets. So when the division took place, there appears to be some balancing done by the mother - RIL kept the gas field assets and the other son got gas supply at a lower price to make profit by selling it. Otherwise, how do you explain the MoU or whatever scheme that was worked out as per MoU promising gas at NTPC rates?" asked a three-judge bench headed by Chief Justice K G Balakrishnan.

Harish Salve, senior counsel for RIL, responded that the company was still willing to sell gas to RNRL at $2.34 per unit, the price committed to NTPC after global tendering. "But what RNRL refuses to read is that RIL's commitment was always with a caveat that supply of gas to NTPC at $2.34 per unit was subject to the government's approval," he said.

He also accused RNRL of "cherry picking" the best clauses of the MoU and gas supply master agreement (GSMA). "The consistent stand of RIL was that the gas price is subject to the government's approval. The government doesn't equate RNRL with NTPC, saying the latter is a PSU and, hence, completely different from RNRL," he said.

Reacting to his comment, the court said, "If this is the case, there is no need to fight between the brothers. They should actually be fighting the government on the issue."

The court also wanted to know what could be the suitable agreement between the two parties on the issue of gas supply.

Salve said the post-contractual agreement (GSMA signed in January 2006 between RIL and RNRL) could be a suitable arrangement to resolve the dispute. The price fixed for sale of gas to the state-owned power utility, NTPC, could be applied to settle its dispute with RNRL, he said, adding that the issue was not price, but the government's approval.

However, the union government's counsel, additional solicitor general Mohan Parasaran, objected to this, saying that RIL cannot rely on the NTPC price ($2.34/unit) as that issue is pending before the Bombay High Court.

"The NTPC contract cannot be raised here, as it is a sub-judice matter in the high court," said Parasaran, when Salve said that the draft of NTPC agreement could be a basis, as it was approved by the government. Though the government raised objection to RIL raising the NTPC issue, senior counsels Ram Jethmalani and Mukul Rohatgi, appearing for RNRL, took the opportunity to criticise its stand on the whole issue.

"The government didn't intervene in the NTPC matter in the high court," they said, adding the "government is in cahoots with RIL." When Parasaran objected to the remarks, Jethmalani said, "I will demonstrate that if not the whole government at least but your ministry - ie the ministry of petroleum and natural gas - is in absolute conspiracy with RIL. I will cite documents, place them on record and prove it.''

Salve and Parasaran however refuted these charges, calling them baseless.

Source - Domain-B

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