Gas opera: NTPC shareholders file PIL

Tuesday, Feb 09, 2010 Updated 21:20 IST

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Gas opera: NTPC shareholders file PIL

Kumar Deep, UTVi

Published on Mon, Aug 17, 2009 at 20:50 IST

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NEW DELHI: Shareholders of NTPC today filed a public interest litigation (PIL) in the Reliance Industries (RIL)-NTPC gas supply case. Sources told UTVi that the Delhi High Court is likely to admit the petition.

The PIL says that NTPC officials are acting against national interest, and Reliance will make an undue profit of Rs 25,000 crore...

The PIL is also asking the Delhi High Court to intervene in public interest.

IANS adds: The petition filed on the behalf of NTPC shareholders by advocate R N Ramalingam also asked the court to order a probe for the supply of 12 million units of gas at $2.34 per unit from the Krishna-Godavari basin.

"NTPC and its officials are acting against the public interest and are acting in a manner that a huge wrongful profit will be made to Reliance Industries to the tune of Rs 25,000 crore at the cost of public exchequer," the petition said.

The litigation was filed here while NTPC was advised by the government to move the Supreme Court to secure gas from Reliance Industries. The Bombay High Court is also hearing the matter.

Two top law officers of the government, Attorney General Goolam E. Vahanvati and Solicitor General Gopal Subramaniam, have already advised the company to move the apex court immediately to secure its interest in the gas row.

"NTPC should take all possible steps to protect its interest as advised by the Solicitor General," said Vahanvati over the weekend, endorsing the Solicitor General's legal opinion to the government.

Law ministry officials said the unanimous opinion of the two law officers has been forwarded to NTPC, which is a listed company that has 10.5% of shares held by public and financial institutions.

"The fact that NTPC had to file a suit is a telling comment on the facts of the present case," said Subramaniam.

"I regret to say that if international competitive bidding processes are intended to be treated with such disdain from responsible bidder (Reliance Industries), the world of business founded on trust and faith will break down."

NTPC - as also Anil Ambani's Reliance Natural Resources - are fighting a legal battle to get gas at $2.34 per unit from Reliance Industries, which has refused to do so, saying the government's stand on price would frustrate the deal.

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3 comments | view all

Have to say something?

Fibbo ( 18 Aug 2009 : 10:12 AM )

PUBLIC VIEW FOR ANIL AMBAMI. I am one of the shareholders of RIL & also NTPC, so I am one of the public interest. But I would like if gas price comes at USD4.2 mmbtu even though RIl going to make profit. RIL's profit would be again invested in economy in terms of new companies, new exploration & drilling of oil & gas & ultimately lead to employment, Growth & better returns for shareholders in the entire broader market. So ADAG should take my view which is public view that gas price should & must be set at USD 4.2 per mmbtu & gas prices across globe not likely to be around USD 3 or USD 4 in coming years. & I think we PUBLIC absolutely do not have any objection on RIL making Rs. 50,000 Cr profit.

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Pavankumar ( 18 Aug 2009 : 10:18 AM )

Out of 80MMSCMD of gas , let us say 36MMSCMD is allotted for power sector . With this gas , 186 million units of electricity can be generated per day(at unit heat rate of 1800Kcal/KWH) . With national average of T&D losses at 20% , extra fuel cost going as waste alone works out to Rs. (0.80*186*0.2/10) crores = Rs. 2.88 crores per day which is Rs. 1051 crores per annum . Of the remaining 80% , We can assume that at least 50% of power generated will be given for rural,farm,domestic sector where extra cost of generation has to be borne by govt . This works out to Rs. (0.80*186*0.8*0.5/10) crores = Rs. 5.952 crores per day which is Rs. 2172 crores per annum . It need not be said that that government has to incur similar additional subsidy burden even for the gas supplied at higher price to fertilizer sector and some part of transport sector as the end product is subsidized again . This amount is not expected to be less than Rs. 2000 crores per annum . Hence , total additional subsidy burden on this account alone will be around Rs. 5223 crores per annum as per conservative estimates and it can be actually higher . We should also consider the effect of additional burden on the national economy due to higher cost of fuel which goes as input in various industries . This will either add to inflationary pressure and adversely affects competitiveness of Indian industries in the area of exports . It needs to be quantified . Let us see the issue of break-up of additional revenues/profit between RIL and govt . 1 mmBTU of gas is equal to 27.096 SCM , 80MMSCMD = 2.9531 million mmBTU , higher cost per mmBTU is USD 1.86 , Rs. 48 per USD , USD 5.492 million per day or Rs.26.36 crores per day . Hence , Extra revenue due to increase in price of gas from USD 2.34 to USD 4.2 works out to Rs 9623 crores per annum for 80MMSCMD of gas . As per some of the reports , govt’s share is 30% of profit or 17MMSCMD which works out to Rs. 2045 crores per annum out of total additional revenue of Rs 9623 crores whereas Rs 7600 crores per annum will go to RIL . Compare govt additional revenue of Rs 2045 crores per annum versus additional subsidy burden of over Rs 5200 crores per annum . If this is the case , even a fool can understand what “national interest” govt is trying protect . In addition to these figures , there will be negative effect on industry and rate of inflation due to higher gas price as explained earlier .

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fibbo ( 17 Aug 2009 : 03:30 PM )

NTPC is Govt. of India Enterprise & Govt can do anything with NTPC's gas price deciding factor as biggest sharholder. Retail ivestors has nothing to do with gas price although they are shareholders. Retail shareholders do not hold power to decide gas pricing as they do not include in management decision making process. NTPC shareholder's demand likely to be rejected at appex court. Also. NTPC has been identified as a profit inflated or account inflated entity before some 1 month.

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Pavankumar ( 18 Aug 2009 : 10:21 AM )

If govt is serious about national interest , govt should state that 28MMSCMD of gas will be given to any power plant at USD 2.34 per mmBTU on competitive tariff bidding basis as per latest CERC norms . This will enable lower cost of power in national interest and it will also be seen that no industrial group is favoured . Doubts appear on the stated stand of Govt about gas supply that it shall be as per Gas utilization policy . As per information available , EGOM concentrated on fixing the price only two years back with probably a hidden agenda leaving gas utilization policy undecided till early 2009 . If gas utilization policy is of utmost importance , why was the utilization policy announced much earlier rather than mentioning it after High Court ruled in favour of RNRL . Petrloeum ministry’s statement that they are not aware of MOU between RIL & RNRL is simply childish because whole nation knows it for years . And also , it is expected that amount of gas allocated for each sector only will be dealt with by gas utilization policy . Once , certain quantum of gas is allotted for power sector , who gets this gas should be purely on the basis of tariff bidding as per CERC norms and nothing else . The principle of market discovery of price for natural gas with pass-through of fuel price for power generation is absurd as power producer is not going to bear the burden (it is pass through for him) . He can always agree for higher price in collusion with Gas supplier and create artificially higher market price , particularly when gas purchase is handled by few high volume buyers . Hence , market discovered price shall be made applicable for Merchant power plants alone for certain portion of gas allocated for power sector . Regarding the price of USD 2.34 per mmBTU & USD 4.2 per mmBTU : RIL quoted the price of USD 2.34 per mmBTU to NTPC against international tender . Every one is very confident that RIL must have made all necessary commercial calculations before quoting this rate and they were not under any compulsion to quote such rate . Even now , RIL has not said it can not supply at that rate to NTPC due to commercial reasons but it says it is bound by EGOM decision . Is any one such a fool to believe that a company like RIL offered to supply gas at that price (2.34) without knowing it’s contractual obligation with Govt . If it has really done so , then RIL should be penalized and not rewarded with higher sale price . The way RIL escalated the cost and EGOM played a helping hand . Another point to remember is that USD 4.2 per mmBTU is the ceiling price set by EGOM and not actual sale price as per information available on website . Then , how is it that RIL can not sell at any price lower than the ceiling price . These questions have not been clarified in any pronouncements . It is surprising that even major political parties like CPI,CPM,BJP have not come out strongly , on their own , against the stand taken by govt with facts and figures till they are practically forced RNRL started bringing out facts & figures . Blame lies on media equally for not having brought out facts and figures to public knowledge . Media surprisingly boasts of investigative journalism and blows out of proportion in case of minor issues like a school teacher misbehaving with a student in delhi or arushi’s murder case . Whereas , no siginificant article bringing out clear picture has not been seen in any news paper . Given their resources and reach , this reflects very badly on media’s priorities and even doubts over their seriousness about maintaining high standards of fourth estate which is a vital pillar in a democracy . It is hoped that some body will take lead to bring out real issues rather than cover up statements . Otherwise , all this points to ULTRA MEGA SCAM with players from various quarters . Another group which should have taken up the cause is lawyers forums as this issue definitely deserves to be taken up as a PUBLIC INTEREST LITIGATION . Lawyers forums and NGOs have necessary resources in this regard . common man has highest regard and faith in our Prime Minister as an individual . But it appears that he is bound by political forces and is probably unable to take right decision which he might want as an individual . One can only pray to god that at least Prime Minister’s office will take necessary action to dispel doubts and put things right . One can only pray that Supreme Court should go into the depth of the case with the help of experts in the relevant fields and should deliver the judgement taking all the time necessary as this has huge financial implications for the country and that too for many years to come . It will be definitely in national interest if others can contribute/correct relevant information and to help in creating public awareness on a large scale . Media has a major role to play in this regard , given their strategic place in public domain . Any journalist who can collect the information and present a complete picture can think of unfolding mega BOFORS like issue .

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Fibbo ( 17 Aug 2009 : 03:23 PM )

I think shareholders of NTPC are jealous of RIL's profit making & they are mostly diverted by crooked man Anila ambani. The PIL will not be entertained mostly. & NTPC shareholders are frustrated not because of RIL making profit but because the stock has not moved up in the recent rally. That was due to overbought state of NTPC which did not show enough correction during recession. Same can be said with Infosys which will likely to trade at current level for some 1 year. NTPC shareholders are frustrated due to no upside in NTPC stock not due to RIL-NTPC gas opera. I had made clear before some 6-8 months when NTPC did not show correction upto 140 that NTPC will not see upside in recovery as investors are not satisfied with price of NTPC share & NTPC has disappointed the would be investors by not bottoming out during recession.

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