)
With gas production from KG-D6 dropping further, Reliance Industries Ltd (RIL) is trying to free itself of all liabilities, under the new draft gas sales purchase agreement (GSPA) circulated by the company among consumers.
Under the existing agreements, set to expire on March 31, RIL reimbursed buyers any ‘ship-or-pay’ liabilities customers owed transporters when gas volumes fell. The new draft has done away with this clause; now, buyers will have to pay the penalty to the transporter, Reliance Gas Transportation Infrastructure Ltd, a privately owned company of RIL chief Mukesh Ambani.
Though it wants changes in most clauses, the Fertiliser Association of India (FAI) has demanded the clause on shipping liability be retained. Besides, it wants an assurance on long-term supply to consumers. “Gas being the mainstay of plant operations, the fertiliser sector needs to have a long-term gas supply arrangement; it cannot depend on short-term supply contracts. The term of the GSPA should, therefore, be at least five years, similar to the agreements executed in 2009,” Satish Chandra, joint secretary in the Department of Fertilisers, said in a letter to the petroleum ministry. RIL wants sales agreements to be extended on a quarter-to-quarter basis. On Monday, RIL had sent a revised draft proposal that sought the GSPA be extended on an annual basis, against the current quarterly one. According to the new pact, RIL is also seeking the right to terminate or renegotiate the GSPA in the event of any change in government policies.
In a letter to Petroleum Secretary Saurabh Chandra, he said, “The pricing formula has been changed from a gross-calorific-value basis to a net-calorific-value basis. This will automatically increase the gas price 11 per cent, even without any revision in price.”
“We have GSPA’s with 16 fertiliser units for sale of gas from KGD6. The proposed GSPA is aligned with the Rangarajan price formula based on which price changes every quarter. Currently RIL is discussing the GSPA with the Buyers. RIL will provide GSPA validity for 5 years if the Buyers so desire,” an RIL spokesperson said.
In the meantime, to continue supply from 1st April, RIL has forwarded a simplified GSPA Term Sheet to the Buyers that would be valid till it is replaced by the GSPA. "The key features of the proposed GSPA Term Sheet include (i) No Take or Pay obligation on the Buyers i.e. Buyers to pay only for the quantity supplied by the Seller (ii) Gas Prices as notified by the Govt under the PSC (iii) Sellers responsible for quality specs of Gas (iv) In periods of constraints, gas to be supplied on pro-rate basis to all fertiliser buyers (v) key terms like invoicing, payments, LC etc are similar to GSPA signed in 2009," the company added.
The GSPA Term Sheet is under discussions with the Buyers and expected to be finalized shortly.
