INDIA: Mukesh has power meet on NTPC heat

Barely hours after the new power secretary, Anil Razdan, assumed office at the Shram Shakti Bhavan, a high-profile visitor walked in for an ‘unscheduled meeting’. Reliance Industries (RIL) chief Mukesh Ambani called on the new power secretary ostensibly for a courtesy call amidst speculation over RIL’s gas contract with NTPC.

RIL, it may be recalled, has been in the news for delays in the gas supply contract it had signed with NTPC. The company, slated to begin gas production early next year, had committed to sell gas to NTPC for its Kawas and Gandhar power projects. However, RIL and NTPC are now in court over differences in the gas contract conditions.

When asked about the meeting, Mr Razdan said, “It was a courtesy call and he was explaining his retail business.” Mr Ambani’s visit assumes significance in the backdrop of the recent development when a committee led by Cabinet secretary BK Chaturvedi called upon RIL to honour its commitment. At stake are projects of almost 10,000 mw involving an estimated cost of Rs 50,000 crore. Interestingly, The RIL chief’s visit comes even as the group is reported to be drawing up plans to develop power plants on its own.

A meeting chaired by the Cabinet secretary to resolve the issue of RIL’s gas commitments for power projects amounting to 10,000 mw, scheduled for Thursday, was postponed. The meeting, sources said, was to consider a proposal for an out-of court settlement between NTPC and RIL.

The settlement formula, decided by the prime minister’s Energy Coordination Committee, was to ensure that NTPC’s Kawas and Gandhar power projects would have the first draw on gas from RIL’s Krishna-Godavari fields and the price of $2.97 per million British thermal unit for 17 years would be accepted.

In return for meeting the conditions, NTPC would agree to a reasonable cap of the penalty for non-supply of gas to its two power projects. A working draft of the formula suggests there could be a clause in the agreement that should say: Notwithstanding anything else in the agreement, RIL shall ensure that NTPC power stations at Kawas and Gandhar will have the first claim on supply of gas from the Krishna-Godavari basin gasfields of RIL.

Sources said RIL had not accepted the formula. While RIL has made heavy weather of the lack of a cap on the penalty, the fact is that it was a condition of the tender put out by NTPC. In accepting the contract, RIL had accepted the bid condition as well. However, sources said the power ministry was willing to go along with the compromise formula, given the impasse.