INDIA BUSINESS WORLD - JULY 2006
THE MONTH THAT WAS...

NTPC DADRI PLAN TAKES A HIT AS RIL RENEGES ON GAS PRICE

THIS surely is the death knell for the NTPC power projects at Dadri. Reliance Industries (RIL) has now indicated that selling gas at the contracted price may not be possible given the change in global gas prices.

Power secretary R V Shahi has communicated to the Cabinet secretary that RIL, which so far was open to an out-of-court settlement on gas price, is no longer willing to sell gas at the contracted price. A Cabinet secretariat committee had been formed to look into reviving the power project through an out-of-court settlement.

This simply means kissing goodbye to NTPC's plans of generating almost 2,600 mw power at Dadri for the western and northern regions. Also, the power company may be left with no option but to pursue the legal course on the project. RIL's changed position will also end up impacting Anil Ambani's plans for developing the Dadri mega project as it was closely linked to the NTPC project.

The power secretary — who had been in touch with RIL for working on the contractual obligations and the gas sales agreement which is now sub judice — has informed the Cabinet secretary that RIL was not willing to offer gas at the price quoted earlier as it did not seem to be acceptable in the changed circumstances. Gas prices have moved up sharply over the last two years and have been hovering at over $10 per mmbtu in the US spot markets. In India too, some of the private gas producers are selling gas at $4-6 per mmbtu.

In fact, NTPC itself has had to buy gas at more than $7 per mmbtu during the summer months from Shell to meet the summer peaks.