NTPC to sue Reliance

Seeks legal help to enforce gas supply contract.

The government said NTPC Ltd was taking legal steps to enforce its gas supply contract with Reliance Industries Ltd (RIL) for its power plants in Kawas and Gandhar in Gujarat.

"NTPC is taking legal and other steps for enforcing the contract. The power ministry has written to the petroleum and natural gas ministry for initiating administrative measures," Power Minister PM Sayeed told the Rajya Sabha.

The power ministry also wants "appropriate steps" taken for revising RIL's production-sharing contract.

The statement comes after RIL's bid to increase the price of gas and change production schedules it had committed for the gas deal with NTPC for the two power plants to be commissioned by 2007.

Sayeed said RIL was seeking major deviations related to limitation of liability, gas supply, and development and production plans. "The changes sought by Reliance will have adverse commercial impact on NTPC," he said.

When contacted, NTPC Chairman CP Jain refused to comment. Reliance executives also declined comments.

In July 2004, NTPC had awarded a contract to RIL for supplying 13 million standard cubic metres of gas per day for the two power plants. The initial offer was for $2.94 per million British thermal units.

On the other hand, RIL was willing to sell its own gas at the decided price. However, it could not buy gas at a price higher than what was quoted in the agreement and sell it at a loss to NTPC.

RIL was supposed to supply gas to NTPC by the end of 2007, but it was postponed till June 2008 due to unavailability of rigs and service contractors.

In a letter, NTPC has asked the power ministry to take up the matter with the petroleum ministry to ensure that RIL sign the gas sales and purchase agreement at the earliest and develop its gas fields in step with the original schedule.

The PSU has said that it can fall short by around 2,600 Mw of the capacity addition target for the Tenth Plan.