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Home News Power Sector News Buying Reliance gas - NTPC opposes paying marketing margin

Buying Reliance gas - NTPC opposes paying marketing margin

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NTPCState-run NTPC has agreed to buy natural gas from Reliance Industries but is opposed to paying marketing margin to the private firm and wants to use the fuel at plants other than Kawas and Gandhar that were identified by the government. The government had allocated 2.67 million cubic metres of gas a day of natural gas from RIL's Bay of Bengal KG-D6 fields to NTPC but the state-run firm has refused to sign a purchase agreement, a senior official said.

The state-run firm was initially reluctant to take the allocation it had vehemently fought for, on grounds that it may compromise its court case against the Mukesh Ambani-firm for non-performance of a 2004 tender.It has now agreed to buy the fuel but wants to renegotiate the terms, he said. "NTPC doesn't want to pay $0.12 per million British thermal unit marketing margin and wants changes in penalty clause to make RIL liable for defaults."

Also, NTPC wants to use gas at plants other than Kawas and Gandhar, which were originally identified by the government to use 1.76 mmcmd and 0.3 mmcmd gas respectively.

The official said NTPC's demand for changes in the Gas Sale and Purchase Agreement (GSPA) would not be possible as uniform agreements have been entered into with about two dozen buyers in fertiliser and power sector on terms negotiated by ministries of power, fertiliser and petroleum.

The official said the terms offered by RIL were most suited for buyers.

The GSPA has typical take-or-pay clause wherein a buyer will have to pay for the contracted gas supplies even if it does not take deliveries.

But the agreement also has provision that RIL would deliver the undelivered gas, for which payments had been made, in subsequent years of the contract. And if the deliveries cannot be taken, RIL will reimburse the amount.

Of the 17.99 mmcmd gas allocated to the power sector, a gas supply pact of only 2.67 mmcmd allocated to NTPC remained to be signed. NTPC's opposition had also delayed the GSPA for a separate 2.7 mmcmd allocated to the Dabhol power plant.

Initially, RIL opposed selling the gas to NTPC due to an ongoing court case but the state-run firm vehemently challenged it saying its legal battle with the Mukesh Ambani-run firm was for future projects and its current plants were entitled to get gas from the country's largest gas field.

RIL did not want to sell gas to NTPC as the state-run firm had cited the court case to not only refuse participation in the process of discovering the price of KG-D6 gas but also blocked moves to sell the fuel to the Dabhol plant.

RIL had in 2007 offered gas from its KG-D6 fields to RGPPL but NTPC, which is half owner of the country's largest gas-fired unit, blocked the move even though this gas is 25 per cent cheaper than imported-LNG being used at the plant.

RIL had in June 2004 won an NTPC tender to supply gas to its planned Kawas and Gandhar expansion projects in Gujarat but the two firms did not sign the GSPA due to disputes over issues such as liability in the case of default.

NTPC had filed a case against RIL at the Bombay High Court in December 2005, claiming that there is a concluded contract in existence for the supply of gas by the Mukesh Ambani-led firm to its power plants. According to RIL, the matter remained at the stage of negotiations.

Source- Business standard


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