High gas price will have ripple effect, says RNRL to SC

Gas at US$4.2 per unit would mean fertiliser would be available double the cost and power at Rs 15 per unit, said Rohtagi appearing before a bench headed by Chief Justice K G Balakrishnan. When the court asked would it sell power cheap, if gas was given at lower price, he said, “May be yes, but it would take three years to set up the Dadri power project.”

What would it do with gas when the project was not ready, he said RNRL would trade gas by selling it to the same consumers who are now getting it from Reliance Industries Limited (RIL) in accordance with the agreement that was for 17 years.
Justifying the RNRL argument, Rohtagi said the project could not be set up as RIL did not sign a bankable document facilitating the finance for establishing the project.
He said “I would say, they are delaying the project and gas in KG 6 will last till 2025.”

However, the judges said that according to the agreement it did not have the right to trade natural gas, but only to use as fuel to produce electricity.  If the scheme is incapable of implementation, then the court has a power to issue direction for its execution, he said.

Further, countering RIL’s earlier arguments, Rohtagi said RIL would not make any loss by selling gas to RNRL at US$2.34, which is less than the price US$4.2, fixed by the government. Loss means loss of profit of Rs 25,000 crore, but not making loss out of the project, he said.

Global bidding

RIL could supply the gas from its share of gas as it has signed a production sharing contract with the government. The contract is a production sharing contract and not a revenue sharing contract, he said.

Meanwhile, the Centre, told the court that NTPC is a public sector unit and the price for supply of gas was decided in a global tender bidding.

Filing  a fresh affidavit, Ministry of Petroleum & Natural Gas said ‘’the rights and obligation of NTPC & RIL cannot be regarded as similar in status to the private arrangement as in the case of RIL & RNRL because NTPC is not only a PSU but the process involved for price determination in the case of NTPC gas was by international competitive bidding.”

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