Tripathi: Helping hand

New Delhi, May 20: National oil companies have agreed to divert 2 million tonnes of naphtha from the export market to NTPC as the power major is in desperate need for more fuel to meet its peak period demand.

Petroleum Secretary S. C. Tripathi told The Telegraph that naphtha will be provided at export parity prices of Rs 21,000-22,000 per tonne. This is cheaper than the domestic price of naphtha which is currently ruling at around Rs 26,000 per tonne.

The cost of power generation through the naphtha route is expected to work out to around Rs 4-5 per unit. Since NTPC sells power during the peak period at a higher price, this is a viable option.

A high-level meeting held today to find a solution to NTPC’s fuel woes was attended by senior officials from Indian Oil, Bharat Petroleum, Hindustan Petroleum, ONGC and Gail.

Normally, NTPC sells power at around Rs 2.20 per unit and, therefore, cannot afford to use naphtha as fuel. Most of the NTPC plants are coal-fired and because of the relatively low price of coal it can sell electricity at controlled prices.

The power ministry has managed to stall the petroleum ministry’s move to go in for an increase in natural gas prices on the ground that the power generated from this gas is sold at a controlled price.

The issue was discussed by a group of ministers and was on the agenda of the cabinet meeting held yesterday but had to be deferred given the sensitive nature of the issue.

The government cannot go in for an increase in the price of natural gas without allowing for an increase in the electricity tariff and this would trigger an adverse political fallout.

NTPC has also put forward the argument that natural gas is not derived from crude oil and, therefore, a case to increase natural gas price on the ground that international prices of oil have soared defies logic.

The power major wants the price of natural gas benchmarked to coal as it is the alternative fuel used to generate power.

The cold logic provided by NTPC has in fact been used to rework Petronet’s liquefied natural gas (LNG) contract with Qatar which had been benchmarked to crude oil to arrive at a price tag of over $5 per million British thermal units (MBTU).

The contract had been hastily entered into when Vazapathi Ramamurthy was the petroleum Minster and Petronet, a consortium of ONGC, Indian Oil, Bharat Petroleum and Gail, had just been floated.

Since NTPC is the main customer for natural gas, it could afford to dictate terms for the fuel, which, unlike oil, is not easy to transport and hence extremely difficult to market. The tough stand adopted by the power major resulted in the price being scaled down to around $3.5 per MBTU.