International BusinessRIL says it signed gas contract but NTPC did not
Reliance Industries Ltd (RIL) has said it had signed a contract in December 2005 to sell natural gas to NTPC at $2.34 per million British thermal unit (mBtu) for 17 years, but it was the state-run firm that did not reciprocate.
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Mukesh Ambani-led RIL said it had, on December 14, 2005, sent a signed Gas Sales Purchase Agreement (GSPA) to NTPC, committing to sell gas from its KG-D6 fields at a delivered price of $3.18 per mBtu at its Kawas and Gandhar plants in Gujarat and asked the state-run firm to return two signed copies of it.
“NTPC, however, did not sign the GSPA, instead chose to file a suit against RIL in the Bombay High Court for the reasons best known to them,” RIL Executive Director P M S Prasad wrote to Power Secretary H S Brahma on August 31. “With the matter in court, RIL had no option but to withdraw the offer contained in the signed GSPA sent to NTPC.”
NTPC has taken RIL to court seeking performance of the 2004 bid of $2.34 per mBtu (landfall point price), as the Mukesh Ambani-led company insisted that the price needs the nod of the government, which in 2007 approved $4.2 per mBtu as the price of gas.
“I regret to say that if international competitive bidding processes are intended to be treated with such disdain from a responsible bidder (RIL), the world of business founded on trust and faith will break down... The fact that (NTPC) had to file a suit is a telling comment on the facts of the present case,” Solicitor General G Subramanium had said, opining that NTPC should move the Supreme Court. Prasad rubbished NTPC’s claims that a contract was concluded between the two firms and RIL was now trying to wriggle out because of the sharp upward movement in global energy prices. “Nothing can be farther from the truth.”
“Our own faith in the bidding process is demonstrated by the fact that in December 2005, when the crude oil prices had increased to $57 per barrel compared to $27 per barrel at the time of submission of the bid, RIL signed the GSPA with a gas price of $2.34 per mBtu for 17 years,” he wrote.