RIL-NTPC gas supply spat may be resolved

The spat between Reliance Industries (RIL) and National Thermal Power Corporation (NTPC) over the supply of natural gas to the Kawas and Gandhar power projects in Gujarat may be headed for a resolution.

RIL had won an international bid to supply gas to the Kawas and Gandhar power plants in 2004 but did not sign the contract as it did not agree to the unlimited liability clause in the draft agreement.

The company was to supply 132 trillion British thermal units of gas to NTPC's 2,600 mw expansion plans for the Kawas and Gandhar power plants, at a price of $2.97 per million British thermal unit (mmbtu) for a period of 17 years.

RIL was understood to have proposed a mechanism that would allow fresh price discovery every two or three years, reflecting market realities in the price of gas sold to the country's largest power generator, said sources close to the development.

The new price of gas had been pegged around $4.30 per mmbtu, they added. At present, the spot price of gas is in the $5-6 per mmbtu range.

The two companies are also said to be working out a limited liability formula to cover the eventuality of non-supply of gas or NTPC not buying the gas it contracted for. Under the formula, the company has suggested paying the prevailing market price on the quantity that was diverted as opposed to the contracted price.

Sources said NTPC might also get the first right of refusal on future gas supplies.

Government of India sources said while NTPC was agreeable to paying a higher price for gas, the liability issue was yet to be decided. RIL and NTPC executives were not available for comments.

However, the deal may not pave way for clearing the deal of Mukesh Ambani-led RIL and Anil Ambani-headed Reliance Natural Resources (RNRL). Under the agreement between the two brothers, RIL was to supply gas to Anil's Dadri power project.

The RIL-RNRL deal was rejected by the ministry of petroleum and natural gas as there had been no competitive bidding in the deal.