NTPC sets riders for KG gas deal

NEW DELHI: The government-owned NTPC is expected to sign a gas sales purchase agreement (GSPA) with RIL for the supply of gas to its power plants

with two riders — that the agreement will not have any prejudice to their pending cases and that the marketing margin being charged on the gas price by RIL is reviewed by the government.

RIL is charging 13.5 cents/million British thermal unit (mBtu) as marketing margin for the supply its KG-D6 gas to customers which is in addition to the government-determined price of $4.20/mBtu. An empowered group of ministers (EGoM) has allotted 2.67 million standard cubic metres per day (mmscmd) gas From RIL-operated KG-D6 block to NTPC’s Anta, Dadri and Faridabad power plants.

“It is the government and not RIL, who is marketing the gas for NTPC, therefore, the margin should also be decided by the government,” said a power ministry official requesting anonymity. RIL, the gas producer from the Krishna-Godavari basin, had to surrender its marketing and pricing freedom to the government when a special group of ministers decided to approve the price and put in place a utilisation policy to sell the gas.

NTPC has agreed to the “take or pay clause” under the GSPA that itself increases its liability negating any need for marketing margin, he said. The government regulates NTPC through power ministry. The proposed GSPA doesn’t cover gas supply to NTPC’s Kawas and Gandhar plants due to a court case between NTPC and RIL over its price.

As per oil ministry officials, the production sharing contract (PSC) doesn’t provide for government’s role in fixing marketing margins. “Interestingly, the company (read Anil Dhirubhai Ambani Group) that raised the issue through media, itself signed a contract for KG gas supply and paying the marketing margin. Instead of creating a media hype, the company should seek redressal at an appropriate authority,” a senior oil ministry official, who didn’t wished to be named, said.

In an email reply, an ADAG spokesperson said, “We have simply pointed out, in the broader public interest, that RIL is once again hoodwinking the government and consumers alike by charging a higher sales price than is appropriate… We strongly urge the petroleum ministry to take suitable steps against RIL to protect government revenues, while we take such steps as we are legally advised to protect our commercial interests.”

The company had alleged that RIL would benefit “over Rs 10,000 crore at the cost of the power and fertiliser sectors.”

“RIL is duping the government of its legitimate revenues by characterising this levy as ‘marketing margin,’ while this is nothing but a part of the selling price for gas, on which the government should receive its share of profit petroleum as per the PSC,” ADAG spokesperson added.

Replying to ET’s query on the issue, an RIL spokesperson said that the company has already signed over 35 GSPAs with various customers as approved by the government. “We have concluded our discussions with NTPC for gas allocated for their Anta, Dadri and Faridabad plants. As mentioned in our letter to the ministry of power and ministry of petroleum and natural gas dated September 8, 2009, we await the date of signing of the GSPAs from NTPC,” the person said.