International BusinessRIL accuses NTPC of going back on draft gas pact
Reliance Industries (RIL) has accused NTPC Chairman and Managing Director R S Sharma of going back on the terms of a draft gas sales and purchase agreement that provided for government approving its bid price of $2.34 per mmBtu.
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In a letter to Power Secretary H S Brahma, RIL Executive Director PMS Prasad said that the draft Gas Sales and Purchase Agreement, as finalised by NTPC in May 2005, stipulated that government approval was needed for the $2.34 per mmBtu price quoted by RIL in the PSU"s gas supply tender.
Even "in the suit filed by NTPC before the Bombay High Court, NTPC has sought direction from the court that RIL sign the May 9, 2005 draft of the GSPA, which contains the requirement of government approval to the sale price as a condition precedent to the contract becoming effective," he wrote.
However, NTPC has now gone to Supreme Court against RIL amending its petition in the High Court to say that its bid was subject to government"s pricing and utilisation policy.
Sharma had in a letter to Brahma on August 28 stated that "RIL did not mention in its bid that the price of gas shall be subject to approval of government".
Prasad said the proforma GSPA in NTPC"s 2004 tender had Schedule 3.2 that related to Condition Precedents for both seller and buyers that were to be filled at the time of signing of GSPA and government approval of the price was included in the draft GSPA that was agreed to by NTPC in May of 2005.
"If NTPC was of the opinion that this condition precedent makes the bid of RIL conditional, NTPC would have objected to it, which NTPC has not done till date," Prasad wrote.
"On the contrary, NTPC satisfied itself that the provisions of the Production Sharing Contract (for RIL"s KG-D6 fields) were such that RIL would require approval of the price from the government, if the GSPA was to function as anticipated," Prasad wrote on September 4.
RIL had in December 2005 signed the draft GSPA, provided by NTPC in May that year, that provided for selling 12 million standard cubic meters per day of natural gas from its eastern offshore KG-D6 fields at USD 2.34 per million British thermal unit price for 17 years.
NTPC had, however, not signed the GSPA and instead moved the High Court seeking gas from RIL at $2.34 per mmBtu.
"If NTPC felt that RIL was imposing some new conditionality to the bid in the form of government approval of the price to wriggle out of the alleged concluded contract, it would have challenged in the proceedings. Any suggestion, to the contrary coming from NTPC, at this stage, is clearly an afterthought and for some inexplicable reason," Prasad said.
"The letter of NTPC Chairman contains an isolated statement which is completely misleading as it conveniently ignores the relevant facts and inappropriately suggests that RIL brought in the requirement of government approval later without NTPC"s concurrence," he wrote.