Argument continues

New Delhi, Sept. 5: National Thermal Power Corporation Ltd today moved the Supreme Court to stop Mukesh Ambani-owned Reliance Industries from using the government’s gas pricing policy as an excuse to back out of a five-year-old commitment to supply gas to the state-owned power utility.

Reliance Industries recently secured Bombay High Court’s approval to amend its petition before the court in the gas dispute with NTPC, which the state-owned company has now challenged.

Last month, the government filed a petition in the gas dispute between RIL and Anil Ambani’s Reliance Natural Resources in which it asserted its right to fix gas prices. RIL has been trying to worm the government’s assertion into its petition in the NTPC case before Bombay High Court.

NTPC and RNRL are battling RIL to secure gas supplies at an agreed price of $2.34 per million British thermal unit (mBtu) rather than a government-mandated price of $4.20 per mBtu.

Both entities claim they have cast-iron long-term agreements with RIL that pre-date the government’s decision in September 2007 to fix the price of gas from the Krishna-Godavari basin.

In the RNRL-RIL dispute, which comes up for hearing before the Supreme Court on October 1, the government has asserted that no gasfield contractor can sell at a price lower than $4.20 per mBtu.

However, the government had also said this assertion was without prejudice to the case that NTPC was fighting before Bombay High Court since that price was discovered through a global competitive bidding process.

Despite the rider, RIL has sought to use the government’s logic to wriggle out of its gas supply commitment to NTPC.

RIL claims it had not signed a contract with NTPC. The state-owned power utility alleges that RIL was backing out of its commitment as gas prices rose in the international markets. In recent weeks, however, natural gas prices have tumbled below $2 per mBtu in the US.

In 2004, RIL had won an NTPC contract to supply 12 million cubic metres of gas a day at a price of $2.34 per mBtu to its Kawas and Gandhar projects in Gujarat.

Reliance Industries had told the high court that it would not be able to sell gas to NTPC at $2.34 per mBtu since the empowered group of ministers had fixed it at $4.20.

RIL’s amended plea will enable it to argue that even if there was a valid contract with NTPC, the government’s subsequent stand on gas pricing will frustrate its ability to fulfil its contractual obligation.

A single-judge bench of the high court had allowed RIL to amend the petition, but had stayed its order for six weeks to enable NTPC to file an appeal before the apex court. The stay has been extended by another two weeks by the division bench.