ONGC close to settlement with Gujarat companies

ONGC is close to settling disputes with seven Gujarat state companies involving outstandings of over Rs 6,000 crore.

Subir Raha, chairman of ONGC, said one of the majors has approached ONGC for settlement. "We expect a positive result in the next few weeks," he said.

The company is hoping that once one dispute gets dissolved, others will follow. The issue involves outstanding payments pertaining to the period between 1982-87 when the gas marketing functions were directly handled by ONGC.

The outstanding involves a principal amount of Rs 800 crore and compound interest was accrued on it thereof. The company may have to let go a better part of the interest outstanding. Raha declined to comment on the issue. "We are in the process of discussions and nothing can be said about it," he informed.

On May 6, 2004, ONGC served notice for the termination of memorandum of understanding (MoU) between GAIL and itself, for not stopping gas supplies to seven state owned government companies in Gujarat.

According to state owned gas marketing major GAIL, the case pertains to gas supplies to seven undertakings and government companies in Gujarat, who have disputes with ONGC pertaining to the period from 1982 to 1987 when the gas marketing functions were directly handled by ONGC.

Under the provisions of the MoU, decision in this regard lies with the ministry of petroleum and natural gas (MoP&NG).

During the period under discussion, the price of natural gas was not administered by the government of India (GoI). In 1982, ONGC had increased the price of gas based on thermal equivalence of alternate fuel for the seven state undertakings / government companies in Gujarat, viz. IFFCO, HWP, BMC, GEB, GSFC, GNFC and GIDC.

However, these companies did not agree to pay the increased gas price as claimed by ONGC and continued to pay the old prices which led to price disputes between ONGC and these companies.