Govt asks NTPC to sign deal with RIL, with restrictions

Concerned at the slow progress in expanding electricity generation capacity, the power ministry has asked NTPC to sign the gas purchase deal with Reliance Industries Ltd (RIL) for projects other than expanding the Kawas and Gandhar units, on which a legal dispute is on with the private company.

"We don't want to cause any harm to power generation but we will not disturb NTPC's ongoing case with RIL; the agreement will be for the plants other than the Kawas and Gandhar expansion projects," Power Minister Sushil Kumar Shinde said.

The government had allocated 2.67 million cubic metres of gas per day (mmscmd) from Reliance Industries Ltd's K-G D-6 basin to NTPC.

The state-run firm was initially reluctant to take the allocation it had vehemently fought for on grounds that it may compromise its court case against RIL for allegedly not complying with a 2004 tender.

NTPC had earlier said that it would seek legal opinion before signing the agreement so that its legal case with RIL is not jeopardised.

At present, both sides are in litigation at the Bombay High Court, where NTPC's plea is that it should get gas for expanding its Kawas and Gandhar projects, for which RIL was awarded a contract after it (RIL) bid the lowest price of $2.6 per mmbtu (million British thermal unit) to supply 12 million standard cubic metres a day (mmscmd).

Reliance Industries has entered into similar contracts with nine other power producers, including Essar Power and Reliance Infrastructure.

Of the 17.99 mmcmd gas allocated to the power sector, a gas supply pact only for 2.67 mmcmd allocated to NTPC remained to be signed.

NTPC's opposition had also delayed the GSPA for a separate 2.7 mmcmd allocated to the Dabhol power plant.

Initially, RIL opposed selling the gas to NTPC owing to an ongoing court case but the state-run firm vehemently challenged it saying its legal battle with RIL was for future projects and its current plants were entitled to get gas from the country's largest gas field.

NTPC will get 2.67 mmscmd of gas from K-G D-6 out of the total 18 mmscmd allocated to the power sector by the government.

Reliance Industries has signed deals to supply gas from its K-G D-6 fields to most power sector consumers.