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| Sunil Jain: NTPC has a long way to go | | Compare Anil Ambani's case with NTPC's to know just how lethargic the PSU is |
| Sunil Jain / New Delhi Sep 07, 2009, 00:19 IST |
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You have to hand it to NTPC. It takes 18 months to file a case against Reliance Industries Limited (RIL) for not supplying it gas under its contract — it awards the Letter of Intent to RIL in June 2004 but goes to the Bombay High Court only in December 2005. For nearly four years, the case hardly moves, and gets a fresh lease of life only when Anil Ambani ups the ante in his case that is linked with NTPC’s — the Anil Ambani-RIL gas supply contract is modelled along the lines of the RIL-NTPC one and so falls flat on its face if the NTPC one does. And now, when the Anil Ambani case is in the Supreme Court, NTPC doesn’t join the battle but chooses to file just a largely procedural matter last Saturday. More important, when Petroleum Minister Murli Deora asks for the setting up of another Empowered Group of Ministers to allocate the rest of RIL’s gas, NTPC doesn’t even insist that no allocation be made for its share of the gas — by the time NTPC finally wins its case, assuming it does, RIL’s gas may well be over!
The power utility is so lethargic or constrained, it does not even respond to the points made by RIL Executive Director PMS Prasad — that NTPC doesn’t lose a single paisa whether it buys gas from RIL at $2.34 per mmBtu or at $4.20 since ‘NTPC being a public sector undertaking (PSU), for them the fuel cost is a pass through. So, if they buy fuel at X dollars, that X dollars will be passed by NTPC to the state electricity boards’ (interview to CNBC on September 2). While this effectively demolishes NTPC’s argument that it stands to lose if RIL doesn’t honour its commitment, it doesn’t represent the full picture. Prasad is right that, today, NTPC can pass on fuel costs to SEBs (how that justifies RIL not honouring a contract is not clear) but under the National Tariff Policy, by January 2011, PSUs like NTPC (this already applies to new private sector plants) will have to participate in open bids to sell their power — so if NTPC has to pay a higher price for RIL gas, it will never be able to compete with others. With NTPC not reacting, after a while, everyone will start believing a higher gas price doesn’t hurt it.
A look at some dates in the Anil Ambani-NTPC cases is instructive. In June 2004, NTPC awards RIL a Letter of Intent after it wins the bid to supply gas to NTPC’s Kawas Gandhar power plants. It takes NTPC up to December 2005 to file a case against RIL for not honouring its contract. The matter has since been listed on around 50 occasions and has appeared before at least 14 judges and adjourned on around 33 occasions. It is still before a single judge bench — assuming NTPC wins, the case is likely to go to a division bench and then to the Supreme Court.
In Anil Ambani’s case, the petroleum ministry rejects the RIL-Anil Ambani contract in July 2006 and in just four months, Anil Ambani is in court saying RIL has to honour its commitment; by October 2007, the single judge bench gives its verdict; in June 2009, so does the division bench; the case is now in the Supreme Court.
Given its glacial pace, NTPC should, as the Solicitor General (SG) of India opines, have tried to transfer its case to the Supreme Court. The SG even points to a letter NTPC has from RIL saying it will not sell to anyone else the gas it was supposed to supply to NTPC — the SG says NTPC should get the Supreme Court to convert this into a firm order, but NTPC doesn’t move on this either.
So what did NTPC file in the Supreme Court on Saturday? In the Bombay High Court, RIL had cited a government affidavit saying RIL had no right to commit gas supplies without explicit permission from it — this effectively ensured RIL had no obligation to honour the NTPC contract. NTPC argued RIL could not modify its affidavit to include the government affidavit and the matter went all the way up to the Supreme Court (meanwhile NTPC’s original case remains in the High Court). But given that the government has changed its affidavit to say it did not apply to the RIL-NTPC contract, NTPC’s new plea on Saturday was largely procedural — it was required, but NTPC has not made any serious moves to expedite its case. Point is, do you blame the government for shackling NTPC or is its management incompetent? Neither answer is particularly encouraging.
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