NTPC takes RIL to court over gas deal

RIL had sought for changes in the agreement.

State-owned National Thermal Power Corporation (NTPC) today moved the Bombay High Court against the Mukesh Ambani-controlled Reliance Industries for not signing the gas sales and purchase agreement. The PSU has sought execution of the contract as per the bid conditions.

The move comes within days of the power major informing the government about its intentions to take to legal recourse to guard its interest against the deviation by the RIL in the agreement, which, the NTPC felt, could hurt its upcomming 2,600 Mw power projects.

"Reliance has not agreed to sign the agreement based on the terms and conditions agreed upon in the bids process," the NTPC said in communication to stock exchanges. Iin its suit, the NTPC has prayed for a court directive to RIL for the "specific" performance of the agreement, or the GSPA.

As an interim measure, it requested the court to direct the RIL not to sell, commit or offer gas to any other customer.

Ril had emerged winner of the bid in 2004 for supply of gas at $2.97 per MBTU from 2007 for the NTPC's mega power projects at Kawas and Gandhar, but signing of the final agreement was in abeyance as the private sector major had sought some changes in the conditions.

Earlier this month, the NTPC had written a letter to the power ministry, to take up take up the matter with the petroleum ministry and to ensure that the RIL signs the GSPA at the earliest and develop its gas fields and related pipeline network according to the original schedule.

Although the power ministry had sought intervention of the petroleum ministry in the matter, the latter is believed to have expressed its inability to intervene in a commercial contract between two parties unless there was a violation of production-sharing contract between the government and the RIL.

Earlier this month, Late Power Minister P M Sayeed had said in the Rajya Sabha that changes sought by Reliance Industries in gas supply contract with the NTPC would have "adverse commercial impact" on the latter.

The power ministry had favoured "appropriate steps" for revising the RIL's production-sharing contract.

The RIL was seeking major deviations which were mainly relate to limitation of liability, gas supply obligation and development and production plans.

The power PSU, in its letter, had accused the RIL of "lack of seriousness" to ink the agreement, saying it was a matter of "grave concern" for the company and would result in 2,600 mw shortfall in targeted capacity-addition during the 10th plan.

"The proposed changes being sought by the RIL indicate that it is not only trying to dilute the contract conditions to merely cap its liabilities but also intends to shift/deviate from its obligations and rather make it onerous on ntpc," the letter said.