GoM to decide on NTPC-RIL row

A group of ministers (GoM) next week will decide on the possible out-of-court settlement of the five-year old dispute between state-owned utility NTPC and Reliance Industries (RIL) over gas supply and price. The need for a settlement arises after the government on Wednesday doubled the administered natural gas price from all explorers to $4.2-million metric British thermal unit (mmBtu), said a person familiar with the matter.
Although some maintained that NTPC’s dispute was different from RIL’s case with Reliance Natural Resources, the Supreme Court ruling that the government’s word is final on prices of natural resources almost dealt a blow to NTPC too, the person said.
The ministry of power is likely to take up this issue with the Empowered Group of Ministers, which is scheduled to meet next week, he said. “Pricing has been a major issue between NTPC and RIL and, after the apex court ruling, it has now become clear that the government’s decision would take precedence,” said KPMG executive director Arvind Mahajan.
The state-owned utility, in 2005, had sought relief from the court alleging that the Mukesh Ambani firm was not honouring an agreement reached a year before to supply 12-million metric standard cubic meters per day of gas at $2.34, for 17 years. Responding to a tender by NTPC, RIL had promised to supply gas for NTPC’s Kawas and Gandhar power plants in Gujarat. NTPC had signed a letter of intention with RIL much before the government fixed the gas price at $4.2 per mmBtu in 2007. NTPC has been in consultation with the Solicitor-General of India on this issue and is considering many options to settle the issue, the person said. The Bombay High Court is scheduled to hear the case on July 26, said an executive at NTPC.
“If the EGoM agrees to consider NTPC’s move for an out-of-court settlement, then we would have to withdraw its case from the court,” said the NTPC executive. The government may find it hard to justify a dual-pricing structure after doubling the administered price of gas on Wednesday. Reliance Natural Resources and RIL earlier this month were directed to renegotiate a gas sale contract by the Supreme Court, within the ambit of the government policy.