Amar Singh for Model Gas Sale and Purchase Agreements to Reduce Disputes

Below is an article in the Web Ed. of Financial Express on Amar Singh and Standard Gas Sale and Purchase Agreements

Standardise gas sales, purchase agreements: Amar tells Centre Posted: Sep 25, 2008 at 2257 hrs- Financial Express)

Samajwadi Party leader, Amar Singh has asked the government to frame standard gas sales and purchase agreements in order to avoid legal battles and disputes arising over the sale and purchase of gas.

Towards this, Amar Singh has asked the chairman of the empowered group of ministers (EGOM) on natural gas, Pranab Mukherjee to consider constituting an inter-ministerial group headed by advisor (energy) planning commission and with representatives from the ministries of fertilizers, power and petroleum to finalise a standard gas-sales and purchase agreement for natural gas.

Amar Singh has told the government that disputes and litigations, particularly on natural gas, are time consuming and “disrupts the economic growth” rather than helping the country in any manner.

According to Amar Singh, “We already have standard Production Sharing Contracts (PSCs) approved by the ministry of petroleum and natural gas, standard power purchase agreements approved by the power sector regulator CERC and similarly standard coal supply agreements— currently being finalised by the coal ministry. Therefore, there is no reason why we cannot have standard gas sales and purchase agreements which would not only eliminate the legal battles but also foster the same level of discipline, transparency and compliance.”

This, he says, is also in line with the international practices to avoid future disputes over sale and purchase of gas by producers and consumers.

Currently, the country has two major ongoing disputes running over the supply of gas from the prestigious D6 gas field of Reliance Industries Limited on the eastern offshore in the Krishna Godavari basin. Fighting the cases with RIL are companies—including NTPC in the public sector and Reliance Natural Gas Resources—an Anil Ambani group company respectively. Both the disputes are over the gas supply agreements with the producer-Reliance Industries Limited.
The SP leader has also asked the government to immediately approve the NTPC-RIL gas sales price of $2.34 per mmbtu, which he said was discovered through a transparent competitive bidding process and also conforms to the provisions of the production sharing contract. Amar Singh says that “gas pricing is not a point of current dispute between RIL and NTPC’ and should therefore be approved by the government.

What Amar Singh has not mentioned in his letter but is worth noting here is that any favorable decision on the gas price for NTPC will have direct implications on the other ongoing dispute between the two Ambani brothers. “Any settlement on RIL-NTPC gas price issue will automatically be taken as the price for RNRL-RIL gas deal as Anil Ambani firm had quoted the NTPC price as the gas sales-purchase price,” said a senior power ministry official.

Amar Singh refers to the two legal opinions sought by him, as per which, the price of $2.34 per mmbtu is not a point of dispute and the differences are over some other terms and conditions of gas supply agreement between RIL and NTPC. On its part, RIL sources said there is no such signed agreement between RIL and NTPC.

“Considering that NTPC-RIL price satisfies the PSC criteria and is not a point of dispute, I request you to approve the price of natural gas of $2.34 per mmbtu discovered through an open, fair and transparent bidding process,” he said in his letter to Pranab Mukherjee.

The two legal opinions quoted by Amar Singh in his letter refers to the ones obtained from the Retd Chief Justice of India, V N Khare and another from senior advocate Abhishek Manu Singhvi. Amar Singh told Pranab Mukherjee that he is taking up the case of NTPC as a member of the committee on public undertakings. He said in his letter that he was “deeply concerned about NTPC”.

What is only surprising though is that these concerns from Amar Singh are coming after a long gap of five years, ever since NTPC has been embroiled into a controversy with RIL. On the other hand, there have been many instances when Singh has openly expressed his concerns over the delays in the gas supply deal between RIL and the junior Ambani brother.