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Ready to buy power plants: RNRL

BS Reporter  |  Mumbai 

Acquired units to utilise RIL’s KG gas till Dadri facility kicks off.

(RNRL) has said it is willing to buy or lease gas-based power plants until its Dadri power plant in Uttar Pradesh is commissioned, if (RIL) agrees to supply gas. RNRL is engaged in a court battle with RIL for sourcing gas from the Krishna-Godavari (KG) basin.

RNRL also said it would trade the excess gas supplied to it in line with government policy.

RNRL’s counsel Mukul said on Thursday in the Bombay High Court, “Since RNRL will need three years to set up the power plant, it can either lease or buy gas-based power generation facilities, which are lying idle in states like Andhra Pradesh and Maharashtra, and use the gas supply to generate power. It can also trade the gas with other parties in line with the government of India policy as RIL would do.” After RNRL’s plant takes shape, it will use the gas for captive consumption.

A NEW TWIST

  • RNRL said it would trade the excess gas supplied to it in line with government policy
  • The firm's argument comes as a surprise because the company had so far maintained that it would not trade the gas, but use it only to generate power from its plant
  • After RNRL's plant takes shape, it will use the gas for captive consumption.
  • The RNRL counsel told the court that they were ready to negotiate with RIL on the case and share the cost of exploration of gas

  • RNRL’s argument comes as a surprise because the company had so far maintained that it would not trade the gas, but use it only to generate power from its plant. According to RNRL, the gas sale master agreement (GSMA) is a commercially non-bankable agreement, which has prevented RNRL from raising funds and bringing its power plant on course.

    According to GSMA, RNRL is entitled to be supplied 28 million cubic metres of gas per day from the KG basin at a price of $2.34 per million British thermal unit (mBtu) for a period of 17 years.

    Mukesh Ambani-promoted RIL’s senior counsel, Harish Salve, while presenting his case on July 31, had said RIL feared RNRL would trade the gas it got from it at cheap price to a third party since it did not have its power plant in place. “We will buy the gas from RIL at the agreed price of $2.34 per mmbtu and trade it at market price,” said Ram Jethmalani, a senior counsel for RNRL. Earlier in the day, the RNRL counsel told the court that they were ready to negotiate with RIL on the case and share the cost of exploration of gas — which according to RIL has run into Rs 40,000 crore so far — provided RIL shared with them the gas produce from the KG basin.

    Jethmalani reiterated, “and his directors should be prosecuted for criminal breach of trust as the drafts of and GSPA (gas sale and purchase agreement) were approved by the board of RIL at a time when the board of RNRL was also under the control of

    Meanwhile, arguing on the central government’s behalf, government cousel T S Doabia today told the Bombay High Court that National Thermal Power Corporation has no contract with RIL, contradicting NTPC’s own stand in its case against RIL. “NTPC has been arguing all along that it has a concluded contract with RIL. With this statement, NTPC has no case at all,” said

    “This shows your government is corrupt,” added Jethmalani. However, Doabia maintained “my instructions are that NTPC does not have a concluded contract with RIL”.

    RIL won NTPC’s bid for supply of 12 million metric standard cubic metres gas per day in 2004, but the contract is now stuck in a legal row over the issue of cap on liability in case of breach of contract. The matter is pending before the Bombay High Court and NTPC’s stand in the case is that RIL is bound by a concluded contract. RIL, on its part, says the contract is not yet final. The resolution of the NTPC case is important in the RIL-RNRL case as the agreement between RIL and RNRL will provide for RNRL getting 12 mmscmd of additional gas if the RIL-NTPC contract fails. This would entitle RNRL to have a total of 40 mmscmd of gas.

    RNRL, which began its arguments last week, had said either between RNRL and RIL be implemented or destroyed. Else, RIL should compensate RNRL in monetary terms to the tune of Rs 50,000 crore.

    The hearing in the case has been adjourned to September 1.

    A NEW TWIST

    RNRL also said it would trade the excess gas supplied to it in line with government policy.

    The firm’s argument comes as a surprise because the company had so far maintained that it would not trade the gas, but use it only to generate power from its plant

    After RNRL’s plant takes shape, it will use the gas for captive consumption.

    The RNRL counsel told the court that they were ready to negotiate with RIL on the case and share the cost of exploration of gas

    First Published: Fri, August 22 2008. 00:00 IST
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