NTPC accuses RIL of scuttling gas supply

In an affidavit filed in the Bombay High Court on June 7, National Thermal Power Corporation (NTPC) accused the Mukesh Ambani-owned Reliance Industries (RIL) of "deliberately scuttling" the gas supply purchase agreement for the Kawas and Gandhar gas fired power plants in Gujarat so that the company can benefit from the current prices of gas.

The NTPC affidavit, a copy of which is available with Business Standard, states under paragraph 23, "The defendant by raising the issue of price of gas has laid itself bare to plain view its motive for attempting to wriggle out of the valid binding contract between the parties on some pretext or the other, i.e. the price rise and the profit the defendant would make by selling gas in the open market today."

The affidavit goes on to say that if the RIL were allowed to "wriggle out" of the "biding contract", NTPC would suffer as it has not been able to procure gas contracts elsewhere.

NTPC has included figures in its submission to show that because of gas shortage, the plant load factor at several of its gas-fired plants has come down significantly over the last two to three years. RIL, in its affidavit, had said that natural gas was a freely available.

NTPC had filed a suit against RIL in the Bombay High Court in December 2005, seeking gas supply from RIL.

The gas supply was to be in pursuance of the international tender issued by NTPC in 2003-04 in which RIL emerged as the successful bidder.

Under the contract, RIL was expected to supply 13 trillion MMBTU of gas to NTPC for 17 years at $2.89/mmbtu. (The current price of gas are in the range of $9/mmbtu.)

However, RIL did not sign the formal gas supply and purchase agreement (GSPA) and sought changes in the terms of the proposed contract. RIL has argued that as no binding GSPA was in place, it does not have to supply gas to NTPC at $2.89/mmbtu.

The NTPC affidavit says that RIL had confirmed its unconditional acceptance of the terms of the RFP (request for participation) document and the draft GSPA appended to RFP at the time of the submission of the bid.

NTPC has claimed that a valid and binding GSPA came into existence when RIL forwarded a duly stamped and signed duplicate of the Letter of Intent (LoI) to NTPC.

It has claimed that all subsequent discussions, between 16.9.04 and 28.11.05, were on "outstanding required details" of the draft GSPA. The NTPC affidavit also points out that RIL had submitted a Development Guarantee of Rs 20 crore from HDFC Bank as per the terms of the RFP.

An RIL spokesperson said that since the matter was sub judice, the company would file its reply in the court. The hearing in the case has been adjourned to July 17.