RIL says it signed gas contract, only NTPC did not
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Last Updated: Thursday, September 03, 2009, 17:56
New Delhi: Reliance Industries has said that it had in December 2005 signed a contract to sell natural gas to NTPC at USD 2.34 per mmBtu price for 17 years, but it was the state-run firm that did not reciprocate.

Mukesh Ambani-led RIL said it had on December 14, 2005 sent a signed Gas Sales Purchase Agreement (GSPA) to NTPC committing to sell gas from its KG-D6 fields at a delivered price of USD 3.18 per million British thermal unit at its Kawas and Gandhar plants in Gujarat and asked the state-run firm to return two signed copies of it.

"NTPC, however, did not sign the GSPA, instead chose to file a suit against RIL in the Bombay High Court for the reasons best known to them," RIL Executive Director P M S Prasad wrote to Power Secretary H S Brahma on August 31. "With the matter in court, RIL had no option but to withdraw the offer contained in the signed GSPA sent to NTPC."

NTPC has taken RIL to court seeking performance of the 2004 bid of USD 2.34 per mmBtu (landfall point price), as the Mukesh Ambani-led company insisted that the price needs nod of government, which in 2007 approved USD 4.2 per mmBtu as price of gas.

"I regret to say that if international competitive bidding processes are intended to be treated with such disdain from responsible bidder (RIL), the world of business founded on trust and faith will break down... The fact that (NTPC) had to file a suit is a telling comment on the facts of the present case," Solicitor General G Subramanium had said, opining that NTPC should move the Supreme Court.

Prasad rubbished NTPC's claims that a contract was concluded between the two firms and RIL was now trying to wriggle out because of the sharp upward movement in global energy prices. "Nothing can be farther from the truth."

"Our own faith in the bidding process is demonstrated by the fact that in December 2005, when the crude oil prices had increased to USD 57 per barrel compared to USD 27 per barrel at the time of submission of the bid, RIL signed the GSPA with a gas price of USD 2.34 per mmBtu for 17 years," he wrote.

"As of now, the dispute before the Bombay High Court being whether a binding contract between NTPC and RIL ever came into being, NTPC's contention that RIL is trying to wriggle out of a binding contract is nothing but an attempt to mislead the government," Prasad wrote.

Yesterday, Power Secretary H S Brahma said "since Petroleum Ministry has come in the support of NTPC, there is no need for NTPC to go to Supreme Court."

In an application filed on Tuesday, the government made it clear that USD 4.20 per mmBtu price approved by it for RIL's KG-D6 gas was without prejudice to the state-run firm's case against RIL.

It clarified that NTPC's case against RIL was different from the dispute between Mukesh Ambani firm and that run by his brother Anil Ambani.

RIL, Prasad said, had participated in the tender floated by NTPC in 2003-04 for sourcing 12 million standard cubic meters per day of gas "in good faith, despite genuine concerns regarding certain provisions in the draft GSPA."

RIL having emerged as the lowest bidder accepted the Letter of Intent (placed by NTPC) based on the premise that the outstanding provisions of the draft GSPA would be agreed to between RIL and NTPC.

"RIL and NTPC did discuss the provisions of the draft GSPA for about 16 months in good faith and with a view to conclude and execute the contract, but the GSPA could not be concluded," Prasad wrote.

Most of the issues were settled and only RIL's liability in case of default was the only contentious issue.

"NTPC's actions have time and again defied logic and appear to be driven by factors other than commercial prudence," Prasad claimed in the letter.

Bureau Report

First Published: Thursday, September 03, 2009, 17:56

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