This page has been culled out from the earlier page / file, kg scam

For related pages, please refer Government cheats on Gas  or site map 3. Some need further editing

The sickening Jokes in the murky gas issue:

February 2010: Hi NTPC, You have done it, I knew. You are my navratna. How much did you get ? 8000 Crores ? Not bad. Put it in my purse. I have overspent myself as usual. Try to get some more money within a year.

January 2009: Why do you cry for Gas ? And you fought with Reliance ? Naughty boy ! You know everything belongs to me. I have permitted them to resell Gas at price, suited to them.

Did they say that they will give you at half the price / 2.34? Forget it. You are joking. Even I cannot do anything. I did not know earlier that the Gas is owned by me. I thought they were doing the favour to me. Who has the patience to read through all the terms ?

2005 - 2006:  You have an issue with Reliance. Go to Court, go to UN, do not disturb me. 

2004: I am the owner of all the mineral wealth in India. I only lease them out normally and retain ownership. I can even fix the Price.

You idiot, it was a general statement but was not applicable to Reliance. Did you not, know that ?

 

Now to the routine presentation, if you wish to read more

Reliance indirect confession of guilt

The beginning: In 2003, NTPC [ National Thermal Power Corporation, in which Government is the majority shareholder ] floated an international tender for 17 years gas supply, to its planned Kanwas - Gandahar power plants. Reliance bid the lowest - 2.34 Dollars mmbtu - and NTPC gave it a letter of intent in June 2004. [ Business Standard, 7-8-2009 ]

Summary assessment: Reliance is saying that terms about Price, allocation and others, where they are uncomfortable, were not clear in the Production Sharing Contract. If Prasad is speaking the Truth, he also spilled the Truth on a major point, in his interview with Business Standard.

'when you do not know, you try to take risks but you hedge it'. By his own words, he has no real defense for going back on their commitment to NTPC

Prasad / Reliance: 'we get a base price of Dollar 2.50, if the crude falls to 25 barrels per barrel. Our price changes when crude price varies between 25 to 60 Dollars, at which stage, it is capped. There is a floor and cap'.

Either Reliance or Government is lying, when they say that the Gas Price was not fixed. Who all lie?

c] Reliance Objection is untenable - by their own admissions. Prasad's interview

" The main outstanding issue was about liabilities in case of failure to supply, which he felt had to be limited because we were not going to bet the entire company for the sake of a single contract. We offered 50% higher liabilities than what NTPC was giving us for non acceptance of Gas'.

What is wrong with that ? Anyway, it is a minor matter, if you have read so far.

Reliance admits its Guilt in Print

If the above points do not yet satisfy you, here is the admission of Guilt by Reliance

Courtesy - Prasad: 'when the economic value of the contract is protected and a reasonable supply is known, liabilities are important but they cannot make or break the contract'

So, Reliance contention that Liability was the only major outstanding point of contention with NTPC and that was eventually the cause for NTPC's action and Reliance's counter action, is disowned by the President of Reliance Gas, now elevated to Director as well

Need for Power

Shortage of peak time power in the country is estimated to be as high as 18.1 percent in the current year compared to 12% in the last fiscal. [ Business Standard, 12-9-2009]. - 50% more than last year. Country is power deficient. 13 Ultra Mega Power Projects are being planned. Given these, endorsing Gas Sales at a skewed and partisan price will hit the GDP first.

The Tender for Gas by NTPC - JUNE 2004 - committed Price

In 2003, NTPC [ National Thermal Power Corporation] floated an international tender for 17 years gas supply.Reliance bid the lowest - 2.34 Dollars mmbtu - and NTPC gave it a letter of intent in June 2004.

If Reliance offered to sell Gas to NTPC without ownership or power of attorney from the owner,  it is ILLEGAL.

If Government's sanction was required for the Price, allocation and what not, as Reliance now shouts and the Petroleum Ministry echoes that blindly,

Why did Reliance participate in the tender without prior approval ? Let them pay the penalty for their wanton lapse. This is not a justifiable reason by any stretch of imagination

Petroleum Ministry as well as Reliance now say that Reliance was only a contractor for the exploration. If we accept that for a Minute, Reliance Offer of Gas to NTPC at the above stated price, was approved by the Government by efflux of Time / its very act of having dozed for all these years

 

Price Manipulation by Reliance - higher price trick

Reliance ascertains the market price for Gas in 2007 as 4.3 Dollars per mbtu. 

Government, instead of questioning this practice, constitutes a EGoM. Surprisingly, they endorse the price of 4.2 !

[ We are a Democracy. The Ministers cannot reasonably have the right to sanctify the price dictated by a seller in 2007, at nearly twice the price committed by them in 2003. If such a practice is proper, the public should also have the services of such 'EGOM' free - Why only Reliance / Mukesh earn more ? Do we all not have the same right, on such disgusting precedence ]

 

a] Public cannot and should not tolerate a price of 4.2 Dollars per mbtu, as Gas belongs to them and costs the Contractor, only 1.28 Dollars to bring it out. In a basic essential commodity which is required for producing another essential commodity like Power, needed by entire Population, the Sales Price cannot be 3.2 times the cost of Production.

b] Pricing Method should be uniform for all and above Board and not arbitrary / whimsical

Government was paying ONGC less than 2 Dollars per mbtu till Aug 2009. Now it may be raised to 2.6 Dollars per mbtu.  Differential Pricing /  unexplainable partisan approach  deserves unequivocal condemnation. Why should Government make its own offspring, ONGC, an Orphan now ? It must be illegal under law though I know nothing much about Law. It is simple commonsense inference

c] Basis of fixing the Price of Gas is a Manipulation of Reliance / Timing is debatable

Reliance quoted a price of 2.34 Dollars per mbtu to NTPC in 2004. In 2007, 2 years ahead of Production, it seeks the likely buyers for 'their price bids' - just when the Oil prices were shooting through the Roof.

Should they not have asked for Price Bids when they were ready for the Supply in 2009 ?

In Saudi Arabia, Oil / Petrol is nearly free. They produce crude in abundance. Likewise, we now produce Gas. When all and sundry talk about Market Prices, why ignore Saudi ? Is it not part of the globe that we live

In August 2009, as per Bloomberg.com, the price was 2.61 Dollars / mbtu. Reliance and Government should accept this price, as the 'price' relevant and prevailing at the time of supply.

Profiteering / Profit in Power - maintain shortage

We have a Central Electricity Regulatory Commission [ CERC ]. It is a unit of the Central Government. It has the power, under subsection 1 of section 62 of the Electricity Act of 2003 to fix the minimum and maximum ceiling of tariff for sales and purchase of Electricity in the country for a period of maximum 1 year.

In the power exchanges, power price shot upto Rs 14.5 per unit in August 2009. Because of shortage, prices shoot up. CERC has now fixed, for 45 days, the maximum price at 8 and minimum price at 3 per unit.

Bring down the Power Cost with immediate effect and GDP can go up

If Gas is bought by NTPC from Reliance at 4.2 Dollars per mbtu, as Reliance wants and Government pressurises them,  the cost of Production will be Rs 3 / unit. This has been worked out by Mr. Prasad, Reliance Director ]

Let us turn that around. Gas, the basic raw material, accounts for 70% of the cost. Imagine a  Price of 2 Dollars per mbtu. NTPC can produce power at about Rs 1.5 / unit, if Mr. Prasad meant what he said on 7-9-2009

Even if NTPC pays One Rupee more, it is the Public who pay that - to Reliance

Petronas LNG, which competed with Reliance for the NTPC tender, quoted $3.45 per mmbtu only for the LNG supply. Coupled with the quote of Petronet LNG Ltd, which quoted $0.65 per mmbtu for regassification,

the total delivered cost of gas at the power plant would have come to $4.14 per mmbtu as the second best price that NTPC had on offer.

Did Reliance, after getting NTPC's letter of intent in June 2004, deliberately delay it for 18 months, and then staged a drama in December 2005 of Gas Supply Agreement, with terms not in NTPC's tender and blocked them from reaching out to Petronet LNG, a Government linked gas supplier ?

Government's distortions and unbelievable statements

" Ministry of Petroleum and Natural Gas has estimated that the Government would earn 17.8 Billion Dollars over the expected 13 years life of the field" .." This estimate marks the first time the DGH, the upstream regulator has worked out such an estimate"   Business Standard, August 21, 2009

They had a floor price, if Prasad is right. They had none, if DGH estimated the earnings, for the first time after all these years, in August 2009. Who is bluffing the Parliament / the Public ?

For the omissions / oversights, it is better for the Government to forget this 9.2 Billion / 0.7 Billion per year / 3000 Crores per year assumed income and not subject the Public to untold sufferings and price escalations on many other fronts.

 

Governement's legal counsel's view

Solicitor General - G. Subramaniam - Business Standard, 4-9-09

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

 

Cheapness of Prasad / Reliance: Reliance Liability for NTPC - Pay the difference in Gas Prices

1] ' NTPC has contracted RLNG [ regasified LNG] on a long term 'take or pay' basis for 10 years from Jan 2010 for its existing plants at an average delivered price of 11.2 Dollars per mbtu on net Calorific basis'  Read the sentence again to note the Cheapness.

NTPC could have awarded the contract in July 2004, had Reliance not delayed or played for long the 'trust me' dramas.

NTPC should file a case against Reliance ' for Liability to the opportunities lost '.

 

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Main / original content:  2001: Last minor modifications: June 12, 2010:     Personal website of R. Ranganathan M.Sc., [ MBA - IIMA]