No impact on NTPC case, says Govt

With the Supreme Court ruling in favour of the government-set price of $4.2 per million British thermal unit (mBtu), the big question is what happens to the NTPC case against Reliance Industries Ltd (RIL) pending in the Mumbai High Court. The Ambani family agreement, now struck down, had taken the RIL offer price of $2.34 per mBtu for NTPC as the basis of gas supplied to Reliance Natural Resources Ltd (RNRL).

Though the government had, in 2006, rejected the $2.34 price for RNRL, saying that it was not arrived through an arm’s length relationship, RIL had committed the price to NTPC through a tendering process. “If the court determines that there was a concluded contract between NTPC and Reliance, then definitely we would sign the contract but we will still have issues with limited liabilities.

We will go to the government for approval of price according to the provision in the production sharing contract,” RIL director and head of petroleum, P M S Prasad, had said in an interview to Business Standard last year.

Union power Minister Sushilkumar Shinde said the SC’s upholding the government’s right to approve the price and utilisation of gas was a “fair decision” and it had no bearing on the supply dispute between NTPC and RIL. While NTPC chairman R S Sharma did not comment, it is clear the government may take a different view in the case of NTPC. “The government can treat NTPC on a different footing because it is an arm of the government. NTPC will utilise the gas for public good. The government can apply a different yardstick for NTPC,” Mohan Parasaran, Additional Solicitor General of India told reporters here.

A former NTPC chairman was, however, critical of the government, stating that “it has acted like a subsidiary of RIL” by allowing appreciation of the gas price. He said RIL had committed a breach of trust by not supplying gas to NTPC.

While RIL went ahead and sought government permission for selling gas to RNRL at $2.34, it did not seek approval for NTPC since the matter was in the court. “The government could have taken a decision suo motu (on its own accord) to approve the NTPC price,” he added.

The gas price of $2.34 per mBtu, which RNRL had been claiming under a family MoU, is the same that RIL had bid in a 2004 NTPC tender to supply 12 mscmd of gas to the state utility. However, the tender was not executed and NTPC decided to file a case in 2005. In the same tender, Malaysia’s Petronas had quoted $3.63 for supplying LNG to NTPC’s Kawas and Gandhar plants but with RIL bagging the tender, the country lost on the LNG, which would have been cheap by today’s standards.