NTPC makes official disclosure on Reliance gas suit

Speaking publicly for the first time on the gas controversy, government-owned NTPC Ltd today told the Bombay Stock Exchange it was taking its case against Reliance Industries Ltd (RIL) up at appropriate government fora.

It was doing so for safeguarding its interests and based on legal advice from the Union attorney-general and solicitor-general, it said. It also said there was no truth in any claim that it was buying costlier gas since it would be a pass-through for NTPC.

To avoid prejudice to NTPC’s claims in its suit against RIL, it has, on legal advice, not taken the allocated gas from RIL’s D6 basin for its existing gas-based power stations at Kawas and Gandhar, it said. Instead, it would take this gas for its stations at Anta, Auraiya, Dadri and Faridabad, for which it has approached the Union power ministry. Earlier today, power secretary H S Brahma said NTPC would sign a Gas Sale and Purchase Agreement (GSPA) with RIL for supply of 2.67 million metric standard cubic metre per day (mmscmd) of gas, at the government-approved price of $4.2 per mbtu, for these four stations.

It said the expansion project of 2,600 Mw at Kawas and Gandhar would generate 19.36 billion kWh electricity in a year. The total savings in a year on purchase of this electricity by Discoms/SEBs will be around Rs 2,130 crore annually. For 17 years (the supply duration), it works out to be around Rs 32,000 crore and will directly benefit consumers.

The delivered price of gas, considering the commodity price of $2.34 mBtu, works out to $3.30. The price has now been fixed as $4.20 (landfall price) by the government, without prejudice to the NTPC case. The delivered price, after including transportation charges, will work out to be $6.67. The variable cost of power, considering $3.30, is Rs 1.07/kWh and with $6.67, it works out to be Rs 2.17/kWh, translating to a difference of Rs 1.10/kWh. “Supply of gas at $2.34/mBtu will not only ensure cheaper power but also more power to customers by full capacity utilisation under merit order scheduling, which will be in the interest of all consumers,” the company said.

It said that after the placement of a letter of intent for the gas and its acknowledgment by RIL, a contract came into existence with a draft of the GSPA already finalised the during bidding process. “RIL, instead of executing the GSPA, sought to reopen the GSPA by seeking major changes in its terms and conditions and to thereby dilute the very complexion of the contract. This was unacceptable to NTPC,” the company said in its disclosure statement. As already reported extensively, RIL entirely denies this version of NTPC.

A letter of intent was issued to RIL for supply of 132 trillion British thermal units per annum (12 mmscmd) of natural gas at a price of $2.34 per mBtu for a period of 17 years, says the NTPC statement.

When NTPC insisted upon RIL enforcing the GSPA as per the draft finalised during the bidding process, RIL, instead of honouring the contract and executing the GSPA, unilaterally modified the latter in December 2005 and signed and forwarded the same to NTPC for countersigning.