Bankers seek clarification from RIL on guarantee
: State power utility NTPC has not been able to secure bank guarantees for sourcing natural gas from Reliance Industries, as bankers have asked for certain clarifications from the supplier on drafting of the letter of credit.
New Delhi: State power utility NTPC has not
been able to secure bank guarantees for sourcing natural gas
from Reliance Industries, as bankers have asked for certain
clarifications from the supplier on drafting of the letter of
NTPC, which was allocated 2.67 million standard cubic
meters per day of gas by the government from RIL`s eastern
offshore KG-D6 fields, had on September 23 signed Gas Sales
and Purchase Agreements (GSPA) for less than one-fourth of the
Accordingly, NTPC was to open letter of credit (LC) in
favour of RIL for an amount equivalent to a month`s supplies,
a source in know of the development said.
However, "NTPC maintains that its banker has objected to
a particular formulation in the LC and asked RIL to provide
instances of public sector firms agreeing to the same."
PSU gas utility GAIL and Maharashtra State Electricity
Board (MSEB) have provided LCs that include the said
formulation as had been suggested by RIL, the source said.
MSEB is a partner of NTPC in Ratnagiri Gas and Power Pvt
Ltd - the firm that operates the Dabhol power plant - which is
drawing 4.5 mmscmd of gas from KG-D6 fields.
To guard against payment defaults, gas suppliers
worldover ask customers to give bank guarantee for a
particular number of billing cycles. In case of KG-D6, LCs
have to be provided for two billing cycles - RIL raises bills
RIL had signed GSPAs for supplying 0.61 mmscmd of gas to
the state-run firm`s Anta, Dadri and Faridabad power plants.
Anta power plant in Rajasthan signed up for 0.03 mmscmd while
the remaining 0.58 mmscmd was split between Dadri plant in
Uttar Pradesh and Faridabad unit in Haryana.
However, due to constraints in state-run gas utility GAIL
India Ltd`s pipeline to transport KG-D6 gas, all of the 0.61
mmscmd would be consumed at Anta plant, the source said.
The supplies would have commenced within a week but for
the failure on NTPC`s part to open LCs, he said.
The remaining 2.06 mmscmd of gas was allocated by the
government to NTPC`s Kawas and Gandhar power plants in Gujarat
but the state-run firm is unwilling to use KG-D6 gas at those
plants as it is seeking fuel for expansion projects at those
sites from the Mukesh Ambani firm at USD 2.34 per mmBtu rates
committed in the 2004 tender.
RIL has already written to the government seeking
reallocation of these volumes to other customers as NTPC
continues to refuse to even discuss GSPAs for these plants.
The company has been forced to keep output at just over
40 mmscmd of gas from KG-D6 fields despite having a capacity
to produce nearly 65 mmscmd as customers like NTPC are not
taking their allocated quantity and the government has failed
to name new buyers beyond the initial volumes.