RIL, NTPC head for another faceoff

A new battle is brewing between Reliance Industries (RIL) and NTPC.

RIL, the country’s biggest private oil and gas company, is insisting on a more relaxed contract for committing more gas to NTPC. This is despite a government directive asking it to sell 4.46 million standard cubic metres a day (mscmd) gas to the country’s biggest power generator.

NTPC has so far signed a gas sale and purchase agreement (GSPA) for 2.29 mscmd with RIL. With production from its D6 field off the east coast falling, RIL is using clauses in the contract to avoid committing more gas, say government officials.

A senior government official told Business Standard NTPC had sought the intervention of the Ministry of Petroleum and Natural Gas. “Under the existing GSPA, RIL is to compensate NTPC for any shortfall in the committed supply by paying the price difference between its gas and that bought from other sources. The condition is built in the agreement’s ‘take or pay’ clause. RIL now wants to change this for selling more gas,” said the official.

If not for the change in this clause, the additional gas will be sold under the exist-ing GSPA.

On NTPC’s request, the power ministry has asked the petroleum ministry to talk to RIL. The empowered group of ministers had allotted 4.46 mscmd in two tranches to NTPC at a landfall price of $4.2 per million British thermal unit.

GSPA has been signed for 2.3 mscmd. The two companies are yet to sign an agreement for the remaining 2.16 mscmd.

An email to the RIL spokesperson did not get any response.

Out of the gas for which the contract has not been signed, NTPC’s Auraiya plant has been allotted 0.26 mscmd and the Dadri plant (both in UP) 0.54 mscmd. Though there is an ongoing dispute with the UP government on imposition of 21 per cent value-added tax, NTPC has agreed to give bank guarantees to RIL for bearing the tax liability, if any, says the official.

Interestingly, NTPC and RIL had a dispute over the ‘take or pay’ liability when the latter won a tender for supply of 12 mscmd for expansion of the Kawas and Gandhar plants (in Gujarat). With RIL refusing to accept unlimited liability in case of the supply falling short, a GSPA could not be signed and NTPC went to court in 2005. The case is pending in the Mumbai High Court.

A senior NTPC executive said there was also a dispute over the transport agreement with Mukesh Ambani-owned Reliance Gas Transportation and Infrastructure, which markets and transports gas on behalf of RIL. The agreement has a ‘take and pay’ clause under which the liability on transport charges will be borne by RGTIL in case the supply is 95 per cent less than what is mentioned in the contract.