The board of Ratnagiri Gas and Power (RGPPL), the owner of Dabhol power plant, will meet on Friday to decide on buying gas from Reliance Industries (RIL) after one of its promoters NTPC objected to signing the gas contract with RIL.
The government has allocated 2.7 million cubic metres per day (mmcmd) of gas from RIL's KG-D6 fields to RGPPL for the period till September 2009 and 8.5 mmcmd thereafter, to help the nation's largest gas-fired power plant cut reliance on imported fuel.
Subsequently, RIL sent a draft Gas Sales and Purchase Agreement (GSPA) and RGPPL was ready to sign the contract to buy gas at $4.20 per million British thermal unit (mmBtu), 25 per cent cheaper than the cost of imported fuel, but its promoter NTPC objected to it and wanted the board to decide, a RGPPL official said.
"The board meets on May 8 to consider the GSPA," he said.
NTPC, which too has been allocated 2.67 mmcmd gas from KG-D6 for its plants, has been doing flip-flops on sourcing gas from RIL.
When RIL initially opposed the Government move to allocate gas to NTPC due to ongoing court case, the state-run firm vehemently fought saying its legal battle with Mukesh Ambani company was for future projects and its current plants were entitled to get gas from the nation's largest gas field.
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But when under government pressure, RIL relented and sent draft GSPA for signing, NTPC is hesitant and has now sought legal opinion before inking the contract.
Excepting NTPC and RGPPL, RIL has signed gas sale contracts with all the buyers of 18 mmcmd gas from KG-D6 that the government has earmarked for power sector.
"NTPC had in 2007 blocked RIL proposal to meet the entire gas requirement of Dabhol citing the court case," the official said.
RGPPL currently has a contract with Petronet LNG to buy 5.4 mmcmd of imported LNG till September at $5.52 per mmBtu. The delivered price comes to $6.32 per mmBtu while that of KG-D6 gas would be $5.4.
The Mumbai-based firm had in February opposed sale of gas to NTPC as the government-owned firm had cited a case on the Bombay High Court for not only refusing participation in the process of discovering the price of KG-D6 gas but to block moves to sell the fuel to the Dabhol power plant.
The row between the two firms dates back to June 2004 when RIL had won a NTPC tender to supply gas to its Kawas and Gandhar units in Gujarat but the two firms did not sign the GSPA due to disputes over issues such as liability in the case of default.
NTPC filed a case against RIL at the Bombay High Court in December 2005, a good one-and-half years after the private firm refused to sign the GSPA.
The state-run firm claims that RIL's acceptance of a Letter of Intent for supply was sufficient ground for the contract to be considered concluded.