The Telegraph
Since 1st March, 1999
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Reliance gas deal queers NTPC pitch

Mumbai, Feb. 4: The terms of the gas supply deal between Mukesh Ambani and younger scion Anil Ambani will almost certainly have a fallout on the current spat between Reliance Industries Ltd (RIL) and National Thermal Power Corporation (NTPC) over gas supplies to the latter’s Gandhar and Kawas projects.

NTPC has already dragged RIL to court for reneging on a broad agreement they had reached in 2004 under which RIL had promised to supply 12 million metric standard cubic metres a day (MMSCMD) of gas from the Krishna-Godavari basin at a price of $2.97 per million British thermal unit for 17 years from 2007. But after the blowout in crude prices worldwide, Reliance demurred and said it needed to renegotiate the contract.

If NTPC and RIL now return to negotiating table, RIL will propose a price of $3.18 per million British thermal unit (MBTU) ' the same price that has been set for the supply of gas to Anil Ambani’s Reliance Natural Resources Ltd (RNRL).

Though such a possibility is only a conjecture at this point of time, sources do not rule out the event of the gas supply contract between RIL and RNRL having an impact on the spat that the Mukesh Ambani flagship has with NTPC.

One of the major stumbling blocks that has prevented a rapproch- ement between the two parties is the unlimited liability clause in the contract, which RIL claims would not make the project feasible.

RIL has indicated in the past that while it will arrange supplies to the corporation in the event of a disruption, the difference in price of the gas (if it is over $2.97 per MBTU) will have to be borne by NTPC. The dispute is now being heard by Mumbai High Court, which has asked the parties to sort out their dispute. The next hearing is scheduled for February 28.

Amid such a tussle between the two parties, a gas supply agreement has been executed between RIL and RNRL on January 12 for the supply of 28 MMSCMD at a price of $3.18 per MBTU.

However, a key point that has been agreed upon is that the price and commercial terms for this gas supply will be “no worse” than that applicable to NTPC.

It is this clause that has led to the speculation that RIL may now try to modify the price of gas to be supplied to NTPC at the same price that it has contracted with RNRL. However, the success of such a move, if it is made, will crucially depend on the reaction of NTPC.

NTPC officials were not available for comment. Advocate General Ravi Kadam, who is appearing on behalf of the corporation, refused to make any comment on the issues that now arise in the light of the deal between RIL and RNRL.

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