RIL-NTPC dispute over D6 heading for truce

The legal dispute between Reliance Industries (RIL) and NTPC over D6 gas may be heading for a truce, with Solicitor General Gopal Subramanium recommending that the country’s biggest power generator be given gas at a concessional rate under a provision of the production sharing contract (PSC).

According to the PSC it signed with the government, RIL can sell gas at a price lower than the market one to the government or its nominee. “The solicitor general is of the view that this provision can be evoked for NTPC, since it is a government company,” said a government official.

Under article 21 of the PSC, gas sold to the government or any other government nominee, is to be valued on terms and conditions, including pricing formula and delivery, approved by the government. This provision has been interpreted to mean that NTPC can claim gas at $2.34 per million British thermal unit, a price RIL had quoted in its tender way back in 2004.

Senior government officials told Business Standard that the empowered group of ministers (EGoM), headed by Finance Minister Pranab Mukherjee, discussed the issue in its last meeting. “The power ministry was asked to circulate the legal opinion of the solicitor general to all members of the group,” said another official.

During the July 28 meeting of the EGoM, the power ministry had proposed that 12 million standard cubic metres a day (mscmd) gas be given to NTPC at the discovered international competitive bidding price of $2.34, without waiting for the outcome of the pending NTPC-RIL suit in the Bombay High Court.

NTPC has already started work on expansion of its Kawas and Gandhar power projects in Gujarat to meet the milestones necessary for getting gas allocation. The government allots gas to only those units that are expected to be commissioned during this year. “The EGoM is expected to take a decision on it in its next meeting,” NTPC Chairman R S Sharma told Business Standard.

The last EGoM meeting also discussed the Reliance Power’s request of 28 mscmd of gas, pursuant to a Supreme Court judgment that said gas allocation to the Anil Ambani group company should be in conformity to the government policy on price, tenure and allocation.

Though no commitment was made on supplying gas to Reliance Power, more than three weeks after the last EGoM meeting, the government is yet to finalise the minutes. “Though the issue of additional allocation to any power project has been kept open ended, any decision would depend on the minutes,” said an official.