NTPC and RIL updates

New Delhi, Sept. 16 Reliance Industries Ltd (RIL) has said that NTPC
should be cautious before making any comments on the ongoing case
between the two companies. In a letter to the Power Secretary, Mr H.
S. Brahma, RIL, said that a recent statement by NTPC referred to an
ongoing case between NTPC and RIL before the Bombay High Court on the
issue whether a binding contract between the two ever came into being.
"The statement, however, purports to state that a contract came into
existence , even before the Court has heard the arguments and
pronounced its judgement," the letter said.

It added that "in our view, NTPC, a PSU, should have taken care not to
make comments on a matter that is sub-judice lest these be construed
as an attempt to influence the course of justice."It referred to
NTPC's statement that the supply of gas at a price of $ 2.34/mBtu
which was bid by RIL in 2004, as compared with the price of $4.2/mBtu
which was approved by the Government in 2007, would result in benefit
to the consumers. RIL said NTPC's assertion was a "mathematical
conjecture and a hypothetical conjecture." RIL said that the price of
$2.34/mBtu will be relevant only after the final outcome of the legal
dispute between NTPC and RIL and after approval by the Government,
whereas the price of $4.2/mBtu had been approved by the Government.
While the gas price of $2.34/mBtu was bid for the proposed expansion
projects at Kawas and Gandhar, which do not exist today, the gas price
of $ 4.2/mBtu is applicable for the gas allocated by the Government to
the existing plants of NTPC, including Kawas and Gandhar.

Relevant comparison:::::"Therefore, what is relevant to compare is the
difference in price of gas for the existing plants of NTPC — the KG D6
gas price of $ 4.2/mBtu versus the price of alternate gas for these
existing plants," the letter said.Pointing out to the high cost of
power from NTPC's existing plants, RIL said that the average cost of
power sold to the State electricity boards in 2008-09 from NTPC's
Kawas and Gandhar plants was Rs 6.34/unit and Rs 4.64/unit,
respectively. This implies that the average cost of fuel purchased by
NTPC for these plants was $16/mBtu and $11/mBtu, respectively. With
these figures, it is obvious that if NTPC buys D6 gas at the approved
price of $4.2/mBtu, the cost of generating power would be just Rs
3/unit.
With the commencement of gas supply from D6, the variable cost of
power from other plants would fall to below Rs 2/unit, while that from
Kawas and Gandhar will continue to be high. "With such high cost
operations , it is also not surprising that NTPC has not succeeded in
any of the tariff-based competitive bidding for the development of the
Ultra Mega Power Projects," the letter said.

HINDU BUSINESS LINE newspaper.