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GVK, GMR, Tata Power want govt to protect their share of KG gas

This article was posted on Jul 8, 2009 and is filed under Press Releases

The Ambani vs Ambani battle over the supply of KG basin gas has put some corporates in a spot of bother. Companies like GVK, GMR, Tata Power and Torrent have sought government intervention to ensure that the Bombay High Court judgement in the RIL-RNRL gas dispute does not affect their gas supply arrangements.

They fear that the implementation of the court order will affect gas supply, and eventually cast a shadow over their businesses, said a top government official who does not want to be identified.

The RIL-RNRL gas dispute has now reached the Supreme Court after both sides approached the apex court. While RNRL has asked for a stay on all gas allocation to other companies from RIL-operated blocks in the KG basin, RIL has sought a stay of the Bombay High Court order.

The Supreme Court on Tuesday asked both parties to file their replies to the notices to each other, while the government might also have to clarify its stand on the issue in case the court asks it to do so. In its plea to the SC, RNRL has argued that it had been unable to build a power plant because of problems created by RIL. Thus, till its own power plant is ready, it should be allowed to sell gas produced by RIL to other users. A senior official with the ADAG group said that RNRL will sell the gas in accordance with government policy.

This logic is unlikely to be acceptable either to the government or current users of RIL’s gas. In a letter to the government, GVK has said that the court order has “unilaterally” allocated 28MMSCMD of gas for 17 years to power plants of a particular group at preferential rates.

“Not only has this judgement created uncertainty about the availability of gas to our power plants, but it is in favour of one particular group which has been given inexplicable advantage to load the electricity market against all competition,” says the letter.

These companies have also informed the government that lenders (to these companies) require that gas supply is made available to all existing utilities in a fair and equitable manner. The move by these companies to approach the government is based on the reasoning that KG basis gas is national property, and supply of gas to various sectors should be based on the government’s allocation policy.

GVK supplies 10% of the energy requirements of the Andhra Pradesh. Besides GVK, other players like GMR, Tata Power and Torrent have also expressed concern to the government about the possible unavailability of gas and the differential pricing that would arise in the wake of the Bombay High Court order.

These companies have also sought legal opinion, the government official said. Currently, these companies are buying gas at around $7per MMBTU. According to the government’s gas pricing and allocation policy, natural gas prices have been set at $4.32 per MMBTU.

When contacted by ET Now, a Tata Power spokesperson confirmed that the company has applied for 3.5 MMSCMD of gas for its existing power plant in Trombay. Besides power companies, the Fertiliser Association of India (FAI) has also written to the fertiliser ministry, stating that the government has identified the fertiliser sector as a priority sector, and therefore allocation to this sector should be on priority basis.

source: Economictimes

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