RIL-NTPC: Resolution in sight?

27 September 2006

After a two-year long wait, NTPC may finally get gas from Reliance, but at a higher cost, reports CNBC-TV18. However even if Reliance and NTPC kiss and make up, that doesn't clear the deck for the controversial RIL-RNRL gas deal.

The gas deal between NTPC and RIL was finalised in 2004 but agreement could not be reached on key issues. Subsequently, NTPC took RIL to court.

But now sources say an understanding has been reached on three contentious issues. Reliance Industries will not have unlimited liability for non-delivery of gas.

Sources say that both companies are working out the liability limit. NTPC is also likely to get the first right of refusal and the two companies will also relook the deal price. At $3.18 per MMBTU of gas, it is much lower than the market price of gas today, which hovers at close to $5.

Last December, the prime minister's energy coordination committee asked the cabinet secretary to help resolve the contentious issues between the two parties. Sources say that the matter is now with the director general of hydrocarbons.

But a resolution between RIL-NTPC is unlikely to have any impact on another high profile gas deal- the one between RIL and RNRL. Oil ministry officials say that unlike NTPC-RIL, there has been no competitive bidding in RIL-RNRL.