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Spicy Shots:    Judicial Mockery    Kicked Out NTPC    Leasing Iron Mines    Reliance KG Gas Scam  and or   Site map

 

 

  Kicked out NTPC  

 

[ not edited in the last 5 years]

 

If you read this or the other pages connected with some acts of Reliance, you may also feel that a Ministry of Reliance may get created. In my view, the undeserved / questionable 'duty' collected by Reliance is over 58 Crores per day. 

This page was written around Dec 2009. may not be edited in near future - minor cosmetic changes only. related page is Reliance KG Gas scam and Reliance Gas loot

 

Reliance admitted that ti is not the owner of the Gas. They cannot fix the Price

How did they then, quote a price to NTPC against their tender

 

Government and NTPC  - shameless Drama enacted in Public by the Government 

 

2005 - 2006M/s NTPC, You have an issue with Reliance. Go to Court, go to UN, do not disturb us

January 2009: Why do you cry for Gas ? And you fought with Reliance ? Naughty boy ! Suffer till you repent and ask for forgiveness. If you presume to be a Navratna, they are the modern version of Money, the nectar we love. They can do what they want with Gas

Summary: Manmohan Singh as the Chief / Prime Minister / UPA Government, Murli Deora, Petroleum Minister and Mr Sibal, Director Hydrocarbons are individually and collectively responsible for the kick Reliance delivered to NTPC. In this page, joker means either one, two or all the 3 of the above.

 

Gas Pricing: Comment by Montek Singh in February 2012.   'Irrational'.   That speaks volumes

 

Background

 

NTPC is abbreviation for National Thermal Power Corporation of India. It is the largest / one of the largest Power Producer in the Country. Government owns the majority share in the Company. It is called a Navratna Company. On paper, the Board has power to decide on many company issues. The actual limitations were perhaps whispered.

Reliance is one of the largest company in the private sector who got the right to explore for Gas in the KG Basin. 

Its Corporate Ethics was never rated high or dependable in the last 4 decades.

Government signs a Production Sharing Agreement with Reliance for Gas. There does not seem to be any clear cut terms about Price and many more. Reliance finally acted as if it did a favour to NTPC and Government. In my view, Government rewarded it for that

 

The Gas Supply Tender - the Price

 

In 2003, NTPC  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]   Prasad's interview - Director in Reliance 

" 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'.

Reliance did not sign the contract with NTPC on one pretext or another and finally, reneged on the agreed upon Price term also after 16 months.

Summary assessment: 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

 

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 for the LNG supply. There was an added charge of $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 ?

 

Reliance Excuse 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'.

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 the post of a Director

 

Government's collusion or omission or undue favour to Reliance

 

1  Absurd / unbelievable Excuse by Reliance: 

Reliance says after 2008 that Government's sanction was required for the Price, allocation and what not. Then, how did they participate in the tender in 2003 and kept it with them for 18 months ?

If we accept all these, Reliance offer to sell Gas to NTPC without ownership or power of attorney from the owner,  it is ILLEGAL. 

 

2. Reliance commits for 17 years supply in the tender. How could they, when the Life of the Gas field was taken as 13 years for all Financial needs.

4 years of extra income to Reliance conveniently overlooked by the Government

Petroleum Ministry as well as Reliance now say that Reliance was only a contractor for the exploration. No explanation till date for the '4' years discrepancy.  

The life time of the KG gas find is taken as 13 years for cost recovery and 17 years for supply. 

 

The Pricing Puzzle

 

Reliance ascertains the market price for Gas in 2007 as 4.3 Dollars per mbtu.  [It writes to some potential buyers of its own choice for their suggested purchase price and arrives at a figure. This is not questioned by the Government]

Government was paying ONGC less than 2 Dollars per mbtu till Aug 2009.

The cost of Production of Gas from KG basin is only 1.28 Dollars per mbtu

Government, instead of questioning this practice of Contractor's attempt to fix the price 4 years after signing a Production Sharing Agreement, constitutes a EGoM in 2007. Surprisingly, they endorse the price of 4.2!

 

Dec 2014

 

Late Shri Rajashekar Reddy has objected to the pricing manipulations and other points of Reliance Industries. His views have been totally ignored. I had downloaded the contents from http://www.infraline.com  based on a note by another person. Those interested, may use the link to know more of the murky details.   

 

Is Corruption, the most effective management tool in India ? You have to answer it yourself

 

Errors and Omissions exempted.  If there be any unwanted oversights, mistake in content or suggestions for improvements,  kindly let me know
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Personal website of R. Ranganathan M.Sc., [ MBA - IIMA]    Main / original content: around 2000: last minor modification: May 7, 2017