Verdict’s shadow over NTPC-RIL case

The Supreme Court (SC) ruling, especially its references to the government’s prerogative in the pricing of gas, could well impact the outcome of the ongoing dispute between NTPC Ltd and Reliance Industries Ltd (RIL) in the Bombay high court.

The utility’s executives as well as the government’s leading law officer maintained the case in the high court was different from the one RIL and Reliance Natural Resources Ltd (RNRL) fought in the apex court, as it pertained to the sanctity of a commercial contract signed between the two firms and also because NTPC is owned by the government.

The lawsuit between NTPC and RIL in the high court dates back to December 2005, with the point of contention being the existence and terms of a valid contract between the two.

NTPC claims there is one in which RIL promised to supply 12 million standard cu. m a day (mscmd) of gas for the expansion of the state-owned power generator’s Kawas and Gandhar power plants, both in Gujarat, for 17 years at a price of $2.34 (Rs106.70) per million British thermal unit (mmBtu). RIL claims otherwise.

SC, in its judgement in the RIL-RNRL case, stated that “the government owns the gas till it reaches its ultimate consumer”, and “the parties must restrict their negotiations within the conditions of the government policy, as reflected by the “gas utilization policy and eGoM (empowered group of ministers) decisions”.

RIL had amended its petition in the Bombay high court and added the decision of the eGoM to support its case on pricing.An eGoM constituted on gas had fixed on 12 September 2007 the price of the fuel from RIL’s D6 block in the Krishna-Godavari basin at $4.2 per mmBtu. This was endorsed by the SC ruling on Friday.

NTPC executives disagree. “We’ve always been maintaining our case has to do with the interpretation of the contract. Government is the owner of the gas and since we are owned by the government, they can go for dual pricing in NTPC’s case,” said a senior executive, who did not want to be identified.

Arguing similarly, Gopal Subramanium, solicitor general of India, said “both the cases are on a different footing”.

While Union power minister Sushil Kumar Shinde told that “it has been decided by the eGoM to take decision on NTPC’s case after the judgment of the Bombay high court”, another NTPC executive, who also did not want to be identified, admitted that its case was “complicated” and hence open to interpretation.

“There is status quo with reference to our case. The gas is the government’s property and eGoM has the power to approve. The Supreme Court judgment has maintained the government’s authority and the government can approve the price quoted to NTPC. The ball is in the government’s court. We’ll speak to the solicitor general regarding our case,” the second NTPC executive said