Govt says NTPC may buy gas at $4.2, not $2.34

NTPC Ltd. | Power Generation/Distribution | Power | BSE: 532555 | NSE: NTPC

13 Jan 2009 Evaluate

State-owned National Thermal Power Corporation (NTPC) may be set for a Rs 25,000 crore hit, going by the position taken by the government in the dispute between Reliance Industries (RIL) and Reliance Natural Resources (RNRL) in the Bombay High Court on Monday.

In a major change of its stance so far, the Union law ministry claimed that the government had full rights to determine the price at which public sector units such as NTPC bought gas from private producers such as RIL. 'And it (the price) will not be less than $4.2 (per unit),' Additional Solicitor General Mohan Parasaran told a Bench comprising Justice KK Tated and Justice JN Patel.

The government's submissions in the case between RIL and RNRL are 'non evidentiary' -- i.e. they are not counted as evidence since it is not a party to the case -- and can be ignored by the court.

However, the submission assumes significance because the government is fighting another case in the same court, in fact before the same Bench, trying to force RIL to sell gas to state-owned NTPC at $2.34 per unit.

Paying a price of $4.2 per unit to RIL would amount to a mean hit of around Rs 25,000 crore for NTPC. Also the ministry's stance can completely alter the dynamics of the case between RIL and RNRL. Wherein, under the scheme of de merger RNRL had to be sold gas by RIL on the same terms as made to NTPC.

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