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| Edited By: Neeraj Thakur |Source: DNA |Updated: Mar 17, 2018, 03:55 AM IST
The government was busy ring-fencing its own power generation company, the National Thermal Power Corporation (NTPC), from collateral damage in the Ambani brothers’ fight.
Like the Anil Ambani Group, NTPC, in a case being heard before the Bombay High Court, is demanding gas at the price that Reliance Industries (RIL) had offered in 2003 — $2.34 per million metric British thermal units (mmBtu).
“The Supreme Court’s decision has nothing to do with RIL-NTPC case,” said Sushil Kumar Shinde said.
That may be easier said that done. Legal experts believe Friday’s judgment has firmly established the concept of government setting the price.
Meaning, NTPC’s core argument in the Bombay High Court that subsequent policy changes cannot be allowed to infringe upon earlier contractual obligations gets upended.
NTPC has been arguing that it has been exempted from the pricing decision by the empowered group of ministers (EGoM) through a special “without prejudice” clause.
This argument was dismissed by the Supreme Court when raised by the Anil Ambani Group.
“The court is to determine whether the government has the power to determine the valuation and pricing of the gas. This determination by the court is not affected by the EGoM decision, as it would depend solely on the interpretation of the provisions of the production sharing contract itself. But once it is determined that the government does have the power to determine the price of gas, EGoM’s decision regarding the price would be applicable,” the majority bench said.
The controversy started in 2004 when NTPC awarded a tender for the supply of gas for its proposed power plants at Gandhar and Kawas to RIL through an international bidding process.
RIL won by quoting the lowest price of $2.34 per mmBtu, to supply 12 mmscmd gas for 17 years. However, in December 2005, RIL unilaterally modified the agreement and forwarded it to NTPC for execution.
NTPC rejected this and sued RIL in the Bombay high court, seeking supply of gas as per RIL’s bid.
NTPC had to put on hold its expansion plans for the two power plants due to the ongoing dispute.
Stock analysts were not worried about the financial impact on NTPC, estimated at Rs 25,000 crore over 17 years in case gas is supplied to it at the government-set price of $4.2 per mmBtu.
“The fuel-pricing formula for power at the concerned power projects is a pass-through. So even if gas comes at a higher price, NTPC will not have to pay it out of its pockets as the higher price will be passed on to consumers,” said an analyst, who did not wish to be named.
NTPC, however, has refused all offers at mediation, holding on to its demand for cheaper fuel, quoting public interest.
“Supply of gas at $2.34 unit will not only ensure cheaper power but also more power to customers by full capacity utilisation under merit order scheduling, which will be in the interest of all consumers,” the company said in a recent ‘disclosure’ to the stock exchanges.
One of the government counsels tried to play down the impact. “I had been saying that NTPC case stands on a different footing. This is because, NTPC is a government arm and the government can apply a different yardstick for NTPC... NTPC is going to utilise gas for public good and its profits go to government and not to private hands,” said Mohan Parasaran, additional Solicitor General if India.
