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India: NTPC to Pass on Higher Price Burden to Customers
Publish Date : 09-Nov-2009
The power ministry, which is the administrative ministry of state-owned NTPC Ltd, has said if the state-owned power generation major is denied D6 Block gas at USD 2.34 per mBtu, it will not take the burden and will instead pass it on to the customers.
NTPC is fighting a legal battle with Reliance Industries Ltd, the operator of D6 Block, in Bombay High Court over supply of 12 mcmd gas from Krishna-Godavari Basin block at a price of USD 2.34 per mBtu. Reliance Industries had, in 2001, bid for an NTPC tender for supply of the gas for expansion of NTPC\'s Kawas and Gandhar power plants in Gujarat. The Mukesh Ambani firm did not sign a final gas sale and purchase agreement with NTPC, despite emerging as the lowest bidder, and the power major dragged it to Bombay High Court in December 2005. Reliance Industries had previously said it did not sign the GSPA, as it required prior government approval on the pricing of gas, which is fixed at USD 4.20 per mBtu. The power ministry\'s observation is in sharp contrast to Reliance Natural Resources Ltd Chairman Anil Ambani\'s claim in August that the \'Navratna\' company stands to lose up to Rs 300 billion if forced to buy D6 gas at USD 4.2 per mBtu. Reliance Natural is also engaged in a separate legal battle with Reliance Industries over gas supply, which is currently being heard in the Supreme Court.
The Anil Ambani-promoted firm had requested the Supreme Court to allow NTPC to become a party in its ongoing case with Reliance Industries Ltd. NTPC had informed investors last month that supply of D6 gas at the agreed price of USD 2.34 per mBtu could help cut the cost of its power by Rs 320 billion over a period of 17 years, which will directly benefit the customers. It said the cost of power generation at gas price of USD 2.34 per mBtu works out to be Rs 1.07 per kWh. However, this will shoot up to Rs 2.17 per kWh, if it has to buy gas at USD 4.20 per mBtu. The power ministry said it is taking \"appropriate steps\" along with NTPC to protect the interest of the company. \"These steps include approaching Ministry of Petroleum and Natural Gas to prevail upon RIL to sign the Gas Sale and Purchase Agreement and expediting the case in the Bombay High Court,\" it said. Reliance Industries had earlier said NTPC\'s cost of power generation will rise by only 60 paise per unit, if the state-owned company bought gas at USD 4.20 per mBtu.
